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I’ve Struggled to Pay On Two of My Cards But Capital One Just Sued Me. – Stacia

“Dear Steve,

I am 26, engaged, and have one child. I graduated with a BA in 2008 and the only job I found was as a secretary at the university I went to school at. While in college I racked up $20,000 in federal loans and $15,000 in a private loan.

I also managed get myself in trouble with credit cards trying to cover other various college expenses. I got behind on 3 of my credit cards my last semester of school. I was able to get on good terms with bank of america and am making monthly payments on about $5,000 with a very low interest rate. I will have it paid for in 3 years if I continue to make the same payments on it. I had a Chase card too it defaulted and was written off, then I settled with a debt collector and it’s now paid for.

The last credit card, a Capital One card, I have yet to catch up with. I just have not had the extra money to pay anything on it. I have been waiting on a tax return to pay it off. I got a few more tax credits this year because I had a baby. Well I have yet to receive my return and now Capital one is suing me.

I was served papers Sunday to appear in court on June 14th. This gives me two weeks to figure out what to do. I just don’t know if I should seek out a lawyer or try to call the attorney for capital one and set up payments. I really don’t want to go to court but I will if I have to because I don’t want a judgment against me.

Do I try to contact Capital One’s attorney/collectors and make a payment plan or wait until I go to court and see what happens? Do I need an attorney (which I can’t afford and don’t qualify for free assistance)?

Stacia”

The Answer

Dear Stacia,

First, if you are expecting a big tax refund that typically means you are withholding too much each payday when you need it most. Adjust your withholdings to break even at the end of the year, not get a big refund.

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This is a classic example of why embarking on a solution that does not address the entire situation, but attacks it in pieces is problematic.

I can’t think of anything that would prevent Capital One from suing you and winning, probably going for a wage garnishment following that. There is no doubt you incurred the debt and Capital One is enforcing the contract you both agreed to when you took out the card.

It seems the better approach would have been to have considered bankruptcy when you first realized you were having problems. The bankruptcy would have addressed all of the debt at the same time and prevented you from being sued and garnished.

Your number one priority on limited funds is to make sure you are first repaying those student loans. Deferring or postponing payments on those can lead to massive debts. For the government backed loans you may want to look at the Income Based Repayment (IBR) program. The private loans have no options.

As far as the suit goes you can seek the advice of a licensed attorney in your state or you can go to court and answer the questions of the court. Not showing up means you automatically lose.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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