I am married 20 years with 2 teenage children.We have always lived paycheck-to-paycheck. We have never had a savings account with an “emergency fund”.Our income was cut in half when my husband was forced to take an unpaid leave of absence from work from the end of June to mid September then lost his job all together from mid November until Feb 1. During both these periods, he was ineligible to collect unemployment and therefore,basically,I could only afford necessities-mortgage, utilities,gas, food/household items.
Keeping my family together in our home was my only goal. My vehicle was repossessed the week before Christmas, and we are very behind in our credit card payments. We have no family that we can ask for help. We used to have A credit, now I would be afraid to see my credit score. I have collection agencies constantly calling and sending letters, and one attorney has started calling. My husband is back to work now for a month, and I want to try to pay what I owe to everyone if possible and try to get back to a normal life. But everything is on paper, you know, we bring in x per month but it’s not like I get all that the first day of the month and can pay everything then.
I contacted a credit counseling agency (Advantage CCCS) to start a debt management program. On her show, Suze Orman reccommends them over credit settlement agencies. I’m waiting to receive my papers in the mail to sign to be in their program. We have $7,800 in credit card debt plus $1,600 I owe Ford Credit-they sold my truck after repossessing it, this is what’s owed after all that.
ACCCS tells me we can afford to pay $232 a month (this includes their $5 per creditor monthly fee) and it will take 4 years of this to repay the $7,800. I thought debt management was the way we should go until I started doing research on the National Debt Crisis Center and other debt settlement agencies and found your website.
Now I’m thoroughly confused on what is the right thing to do. I am afraid of debt settlement-ACCCS told me that you owe federal taxes on the amount that is negotiated down and that the debt settlement companies don’t start paying the creditors from what you send them until you have paid them their fees. Add to that what I’ve read from your site about them. I thought I didn’t want to file bankruptcy, you know that’s a last resort. But maybe I just don’t really know what bankruptcy is or how it works.
Can you make a reccommendation considering the circumstances I’ve outlined above, what the best course of action would be for us: debt management, debt settlement, or bankruptcy. Also, could you please give a brief explanation of bankruptcy?
Thank you for writing me. I’m happy to help. Tell Suze I said hello if you talk to her.
We really need to work this problem backwards instead of starting with a solution first. You may see things differently but I think what we need to do is start a solution based on the necessities. For me that that would be meeting your required obligations and building an emergency fund before we even start to look at debt repayment.
Not being able to afford your bills does not make you a loser. We’d all laugh at others that try to say that just because your husband got laid off that makes him a loser. So it is just as unreasonable to say that because he got laid off and income was cut leaving you unable to pay the bills that then makes him bad, inferior or a loser in some way. You’ve juggled things for a long time and it looks like you’ve done an amazing job of making it month-to-month. Now is not the time to feel as if you’ve failed in making-ends-meet.
Frankly the last thing you appear to need right now is a debt management plan by Advantage Credit Counseling Service or anyone else. Debt settlement would be an inappropriate solution as well.
The logical solution is consumer bankruptcy. You should click here to find a local bankruptcy attorney and go meet with them. Meeting with the attorney will educate you about bankruptcy and it doesn’t mean you are going in to file. Go talk about your situation.
Based on what you have described it wounds like you would be eligible to file a Chapter 7 bankruptcy. In a Chapter 7 bankruptcy your unsecured debt and the truck deficiency would be wiped away. Bankruptcy would immediately stop any collection activity, stop any lawsuits for collections, wipe away your debt and give you a fresh start. Now bankruptcy will also result in a negative market on your credit but any solution where you pay less than your original minimum payment will do that as well. And in bankruptcy there will be no tax due on the forgiven debt.
I think the best advantage of bankruptcy for you is that unlike in the Advantage CCS approach that will take four years, with bankruptcy you will get the breathing room you need and a fresh start in a few months. That way you can use the next four years to build that emergency fund and rebuild your credit. Rebuilding the credit is a lot easier than people think it is.
So, don’t feel like you need to commit to filing bankruptcy right now but please commit to exploring it and talking to a local bankruptcy attorney. It sure sounds right in your situation and please let me know what you decide to do.
For a little light reading about bankruptcy you might want to read All About Bankruptcy – Chapter 7 Bankruptcy – Chapter 13 Bankruptcy.