Question:
Dear Steve,
I am 26 years old and I have been unassisted by any family members for a very long time. I am on my own, my earning is very limited, and I am currently in school to try to change my prospects. However for the time being my income is limited.
I’ve been enrolled in a program called Clear One Advantage to try to resolve my debts, and I have been enrolled for nearly three years.
They have taken $125 from me every single paycheck for that time, and on my income that is devastating.
I can’t do it anymore, I haven’t seen much of any improvement in my credit, and their fees are so high that any money I save on the settlements just goes right to them anyway.
I tried to cancel my account with them today. I owe just $220 left on my current settled account with them, and there is a $205 balance in my escrow with them.
I offered to give them the extra $15 needed to pay off my settlement and then asked them to reduce my drafts from $250 a month to just $50 a month to pay them their fees after my settlement was finished. They won’t do it.
They are saying I owe them $650 in fees for that settlement and they won’t finish paying off that creditor until the fees are collected.
I just want out of the program at this point, and to find some other way to resolve my debts because they are ruining me with their constant drafts.
I am starting to wonder if bankruptcy would just be better at this point. I just can’t do this anymore.
I make $1000 a month, my rent is $500, and I still have other expenses and I can’t afford the $250 a month and I just dont know what to do anymore.
But I spoke to a bankruptcy representative before and he said if I did bankruptcy I would lose my car, which I need to get to work and to school.
On top of this, I have a few thousand in medical bills that I owe, that they won’t cover as part of their debt resolution program at all, that I can’t afford to pay.
I feel trapped.
What do I do?? I can’t afford the debt resolution program I am in and I can’t afford to buy my way out of it either. I can’t afford my medical bills, and I can’t lose my car for filing bankruptcy. What do I do?
Axel
Answer:
Dear Axel,
I certainly understand you feel like you are trapped in a no-win situation.
I’m not sure who you spoke to about bankruptcy but generally, if you continue to make your regular vehicle payment the lender will let you carry the car through the bankruptcy.
So there are ways to file bankruptcy and keep the car if you keep making the payments.
It sounds as you would qualify for a Chapter 7 bankruptcy and in that case, your debt would be legally eliminated in about 90 days for about $2,000 or less in fees. Attorneys often have payment options for that.
When you are just making ends meet a long term repayment option like the kind it seems you are involved in, has less a chance of being successful.
Solutions that can take years to make payments on like debt settlement, credit counseling, or a debt consolidation loan are tricky since all it takes is one unexpected financial event to ruin your progress.
If I had a magic wand I’d love to turn back the clock and have you talk to at least three bankruptcy attorneys to get a more comprehensive opinion of what bankruptcy would have meant for you then.
ClearOneAdvantage has been around for many years and I believe they are primarily a debt settlement company. They actually do a good job of presenting bankruptcy as an option in the table they have on this page. However, I would take exception to there labeling the credit impact of bankruptcy as severe. Studies prove otherwise.
The one thing you should not feel is trapped. You do have options. Of course, not every option is full of fun.
Rather than being trapped, I think you are at a crossroads. You are standing at the intersection of finishing the plan you started and making changes to what you can currently afford.
Reality might just be that you just can’t afford to continue in the Clear One Advantage program and will have to drop out before completing it. A significant number of people don’t complete settlement programs with most companies. But the long payment term is also a reason why people also fail to complete 5-year Chapter 13 bankruptcy programs as well.
If you do decide to drop out, make sure you stay current on your car payment so you don’t lose that. If you are still experiencing financial pressure I don’t think there is a rush to deal with it until your income prospects look like they will improve.
The best way to keep things in limbo for a number of months is to not yell or be rude to collectors. Don’t make a promise to a collector you can’t afford. If you can’t pay, just let them know that politely. Or don’t answer the phone. Let your account flow through the collections queue until you are either sued or it clams down.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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