50k debt / 20k income

[gmj]

First a big thanks to all posters for all the info I've learned from this forum!

Seeking advice to: do nothing, declare bankruptcy, start paying

Gross Income - 20k/yr - Net 1200/mnth
Student Loans - 28k - Being garnished 10%
Credit Debt - 23k - (10k chargeoff, 10k collection, 3k creditline at bank on autopay)
Trans score at 569 - good credit with amex & sears - accounts paid

In 1999 I dropped out of school at the start of my junior year. I was trying physics, but physics did not like me much. I was out of work for about 6 months and the bills piled up. I have not paid on any of them since, except for the creditline.

To Do Nothing: I live in Oregon with a Statute of Limitations of 6 yrs, so I have 2 yrs to go for my credit debt. Is that too long to try and wait out?

To Declare Bankruptcy: To get out from under the credit debt and focus on the student loans.

To Start Paying: Someone said that if you start paying one creditor, others are likely to start getting tougher on you. If I just start rehab/consol on the student loans is it likely that the other creditors will jump in?

On the student loans: The garnishment is not even paying the interest, so they will eventually be garnishing my social security. I figure that rehab is pretty much out of the question, because I hear that you have to pay it off in 10 yrs, and that would require around 30% of my income. Even consolodating is going to take me until retirement.

Any and all advice much appreciated,
gmj

[kb9tbq]

That is a tough one, you definitley have to deal with Student Loan (unless it is state loan and not government) then it might be dischargable through bankruptcy.

If the Student Loan is dischargable, then you might consider the bk, if not then pay what you can. And hope to out run the other creditors (are they currently bothering you at this point) if not don't dispute with the CRAs leave them be and bid your time.

If you can't make it to the 2 years, then you have to consider then if BK is still worth writing off these other companies (or if you even quilify for chapter 7 / or if you would have to go chapter 13).

A lot of different things here to consider, most people would say, wait and see how far you can get before folding.

[gmj]

Thanks kb9tbq!

The Student Loans are Federal Directs. Three years ago a lawyer told me I had a good chance for a Hardship, but I was taking home $300 less each month. Maybe I will check back with them, just in case. Looking back...I wish I would have...

I have a postal box and that is the address that all of the creditors have, including my bank. And with CallerID I only answer the phone if I know who it is (I usually get 4 or 5 unknown callers a day).

Most of the creditors have offered to settle for up to 50% and one recently offered to settle for 20%. I was wondering if the eight US DEPT ED garnishments listed on my CRs might be a little discouraging to the other creditors?

I think I can make the 2 years to SOL, if the creditors can. After a major panick with my first encountering a judgement (settled), and finding out that I was not and am not alone with this kind of thing, I have decided not to let it get me down...too much.

:)
Not folded yet,
gmj

[kb9tbq]

Thing also about judgments (especially garnishment involved) they can only take so much - and they can't all jump on the band wagon once one has you pinned down. Amounts allowable for garnishment differ from state to state (can most likely be checked with local states attorney).

But would suggest getting into plan with the student loan company, so that one of the others don't try to get to you first, then really hurt your ability to pay off the student loan.

If you flip it around, then they will be left waiting until your obligation is finished with the student loan company. Then they can still sue you (get judgment entered), but won't be able to get garnishment if you can show that your debt to income is already taxed pretty hard to begin with.

You should re-check this advice with an attorney though, to fully understand your state laws; and that you can proceede on better ground.

By getting a judgment; their SOL period will get extended on how long they can legally collect the money owed.

Will depend on the amounts of debt, if they feel it worth persuing, and other things of that sort. You can check the statute of limitations link above to understand your sol period on debt and judgments better.

Looks like you are already pretty much on your game for avoiding them, but be sure to check what is allowable in your state for service on notice of a judgment being filed. Like if they are required to deliver notice in person or if local newspaper can be used, or certified mail. If you have loop wholes exacting what is required and they try to serve you later - you may have an out to get the judgment vacated (dismissed) removed from credit report.

Least you were on top of your game to do limited cease & desist letter, that is goog. Also remember that you want to negotiate all the time, if you plan or get backed into corner to settle on debt. Try all the time for best reporting possible (deletion).

[fixmycredit]

If I were you I would start your disputing process now. You will
probably get a bunch of accounts deleted. If you are successful
enough, you may not have to file for bankruptcy. It is worth a
try. The student loans are probably not dischargable in bk court.
Take your chances on deleting the other debts and not pay.
Wish you the best of luck

FMC

[nomocash]

I was ignorant and did BK with minimal debt. SLs were NOT BK able. I still have the 20k debt I wanted rid of. In technical terms... D'oh.
- 2cents - 2 years is QUICK!

[md]

If I were you I would start your disputing process now. You will
probably get a bunch of accounts deleted. If you are successful
enough, you may not have to file for bankruptcy. It is worth a
try. The student loans are probably not dischargable in bk court.
Take your chances on deleting the other debts and not pay.
Wish you the best of luck

FMC

Even if successful at getting the accounts deleted off of the credit reports, he will still have the debt. And since they are disputed, it may make the creditors wonder what is going on. Is he going to be applying for a mortgage? Trying to get his CR cleaned up to secure financing? Does he have a big fat down payment?

Also, if accounts do get deleted then it may make his credit report look better (which is usually the goal) and make it more difficult to settle on favorable terms. The worse a CR looks the less creditors will take. As for bankruptcy, the debt is still there so having them off of your CR wouldn't do anything.

HOWEVER, if he were able to get his CR cleaned up and then secure a loan to consolidate everything and get lower payments then it may help. This would assume a lot of other things going right as well.

[gmj]

Thanks for the replys!

Been awhile since I have stopped by. I have been trying to get myself into a 'little better' financial position to be able to 'negotiate', or 'file a BK' or ....

I am living pretty close to 'paycheck to paycheck' and I have no savings. But I am looking into moving in with a friend, which will cut my rent and utilities almost in half. If this works out, I am figuring on paying off my 3k creditline, since...

.....ARGH!.....
Ohhh! Debt is so much fun.
I have to laugh a little at the predictament that I have gotten myself into, just for sanities sake. Truthfully, it is kind of hard to look at negotiating and CR's when the bottom of this debt seems so out of reach. I am hoping that moving in with a friend and having some extra money at the end of each month, will give me some more, and better, options for dealing with this.

:)
Still Not Folded,
gmj

[kb9tbq]

None the less, you will want to contact all creditors you are currently and willingly working with to pay... and hound them about granting you some breathing room. Hardship - reduced interest rates and such.

If you don't mind & are currently dealing with the creditors and it is in relation to a bad reporting... then it is worth disputing to see if you can get these bad listings bumped off of your credit report.

But if you don't have the means to pay... disputing with the CRAs is only going to wake up any sleepers collection agencies and such that may have forgotten about you currently - they will be awoken and breathing down your neck for their money.

It does take a very careful analysis and planning before starting in any direction.

You should make up a list of all of your monthly expenses... and your income.. divide what you pay out each month by the amount you bring in to get your percentage utilization.

Make a list showing like this:

Creditor A - Due Date - Full Balance - Interest Rate - Minimum Payment
Creditor B - .....

Then call the ones you want to deal with; be up front with them, keep this list to refer to and tell them exactly what you are dealing with and that you would like a 6 month grace period to freeze the interest rate if possible or reduce it so you can take the opportunity to pay down and get room to work with here. Let them know you are concerned about having to file bankruptcy & really don't want to if you can just get some help to re-abilitate your situation..

SO as you go through your creditors make a note next to each one as to what your new negotiated interest rate will be (and what your new negotiated minimum payment is).

Then once you have completed this part, then add up again and divide by your income brought in each month for your percentage utilization:

Total Debt divided by Monthly Income = Percentage

Then see what extra money you have created, once you know this part... then look at which creditor is charging the Highest Interest Rate and pay double on this; triple minimum payment if possible and continue to pay minimum on the rest... keep doing this until they are paid down to within $50 ... then move to the second highest interest rate creditor. And put 2 or 3 times the minimum plus what you now have available from the first creditor towards this card. Same thing pay it down to with in $50 and move to the next...

This is the slow way... but you can make it. I have done this... and will have to get back on this again myself.. but as you go look at alternatives and every 6 months call your creditors to negotiate the best possible rates at all time. If you can save even more, take advantage of balance transfers also to move high interest debt to low interest accounts when you can. But be sure to read the terms of agreement to understand the fees involved before doing this.

[memphis]

Ok this is my first time to post on this site (i just found it today) But I have a serious problem with my student loans.... Now what I am wondering is, according to bankruptcy law, student loans do not apply, unless it is considered unreasonable to expect the debtor to pay them off... What does that mean exactly? I have somewhere in the neighborhood of $90k in student loans (thanks to grad school) but am not making near enough money to pay them off... Is bankruptcy an option at all? Also, second question, my wife and I would like to buy a house, but the lender will not approve us because of the mountain of student loans listed on my credit... I am going to consolidate, but is there a way to protect myself (and my credit) so I can stilll get approved for a house loan? Thanks all for any help....

[wert]

This may be a little harsh but here goes:

gmj:
From your post it would appear you are in your mid twenties. You can manage you debt, while yolur hole is big, it's not gigantic. You need to bust your butt and get a second job to get your bills paid. There are only two ways to pay bills- either make more money or cut down your expenses to free up cash. You are young enough that you don't want to have your credit in a disaster mode this early. Twenty grand a year is not much money to make, especially if you want to pay bills, let alone have 'toys' in life. Get a second job and get those bills paid!!!

Memphis:
You said part of your student loans were for a graduate degree. That means you are qualified for something. Those student loans aren't going to go away with BK. You are educated enough to get a high paying job at something. Bust your butt and get a good salary going. If not, your are going to have degrees with lousy credit and you can kiss your house goodbye for awhile. Rent, make some money and start paying off those loans. Evidently you had a goal and achieved it with your education, now put that same determination towards your professional life and you'll make it. You have it, now use it!

I don't mean to be preachy at all. You both appear to be young. Dig out of your hole before it's too late. But it does take sacrifices and hard work. You didn't get in debt over night, and you can't get out overnight!
Good luck.

[Ravenous Wolf]

This may be a little harsh but here goes:

Although Wert does sound harsh, I would have to agree with him because I was in a similar situation years ago.

Like, I had 30k in defaulted student loan debt with 5k of it tied up in an unpaid judgment. My credit sucked big green donkey [EXPLETIVE DELETED].

At that particular time, I had a temporary job making 9.50 an hour. And to add insult to injury, I didn't even have my college degree at the time. However, I was working at the operations center of a commerical bank (which was eventually bought up by Wells Fargo) along with a huge room full of temporaries making 9.50 an hour too. And my co-workers were pleased to even have a job because some had 20 years of banking experience and I even worked beside a former Assistant Vice President of a credit union. This was in the middle of the booming nineties too.

My life looked hopeless but I eventually changed things around. Although my education was in accounting, the market was obviously saturated with people who had accounting and finance degrees.

I had to change professions and start learning new skills. Skills that were in demand and that people were paying good money for those kinds of skills.

Now I make much better income than I ever did before and I did manage to get my degree.

However, I know lots of people who were unwilling to acquire new skills or to diversify some of their skill sets and they have ended up unemployed or becoming unemployable because they are not keeping up with a changing work environment.

Having a degree is great but you still have to have skills that people want to pay money for.