I was in the paycheck-to-paycheck situation with student loans taking up almost 40% of my income. (I’m on IBR for my federal, but have almost as much in private student loans.) To help with bills and stay current on my student loans, I’ve been racking up credit card bills.
In late July, I was hospitalized for a week, due to a viral heart infection. I now have heart failure at age 36, due to no fault of my own. Because of missing work and not knowing if I would be able to return, right away, I stopped paying on my debt. I was able to get forbearance for the federal loans, but my private loan said they could only give me 1 month of forbearance in a 12-month period.
Now, going into 2018, my employer informs us that they cannot afford our old health insurance plan ($1000 deductible for hospitalization, $30 office visit copay, $6 prescription copays.) They are going to a high deductible plan, which will save me $5 per month! The only difference is now I have to pay my $250 office visits and $400 monthly prescriptions until I hit $5000, then everything is covered. It was a perfect storm to break me lose from the idea that I need to try to repay my debts and need to make a better decision and pay for my healthcare, instead. (I still owed $4500 from the hospitalization, due to copays, etc.) I rent and own a 14 year old car with no loan and a value less than $3000, so I really have no assets they can seize.
My cardiologist keeps pushing me to work no more than 50% time. I am not sick enough to qualify for any disability through social security. I keep working full time and even taking overtime, just to keep paying for my healthcare and prescriptions. My employer has no positions that are part-time, anyway, so I’d have to quit my job and find something else. I make around $40k per year.
I’m nearing 6 months of not paying on my credit cards and private student loan. The cards are through State Farm ($15k), Capital One ($8k), and Wells Fargo ($20k.) The student loan is $50k through Citizens Bank, serviced by Firstmark. I have gotten rare collections phone calls, but other than Capital One sending daily emails, the rest have only sent a letter every 2 weeks.
What do I need to watch out for as these approach 6 months of no payment/no contact? Is there a “better” time to do bankruptcy, or wait until I am served with court papers? In your opinion, if I am never sued for this debt, is it better to let them charge it off or to get closure and file bankruptcy, to make sure it can’t come back on me in the future?
The time for bankruptcy for you is five months ago so do it now. Its nearly always better to drive the bus than have to react to getting hit by a bus.
Keep your federal on the IBR or other income driven repayment program, get rid of your unsupportable consumer debt, and be aware that the private student loan may disappear and resurface later but get help at that time to negotiate a settlement arrangement on it. Lenders are currently offering great deals.
Bottom line: get your life to fit within your income and focus on doing better moving forward and you will be fine.