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Our Credit Scores Suck, We Have No Savings, and We Are in Collections. – Tara

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“Dear Steve,

My credit score is 580, my husband’s is 608. We are both in our early 30’s and we have a son. We have a combined debt of $31,000 which includes students loans, credit cards, and debt collections. We pay the bills on time but are struggling and have made a couple of late payments. We have no savings except for my 401K. A well placed emergency will place us into disaster. Recently, a lawyer for a collection agency has contacted me, saying I owe $10,000 on a four year old debt that was orginally $6,154. I fear wage garnishment and a lien being put on a car that we still owe payments on. We have only been late on a couple of cards but always manage to bring them back to good standing but we are struggling. We can only make minium payments. We work full time and bring in about $3,000 a month.

Tara”

Dear Tara,

I’d love to tell you that your situation was unusual or unique, but many have found themselves in the same spot. Let me first tell you that while the situation may feel like it is closing in around you, there is hope, there is help.

Basically you are in a treading water situation. You will not be able to break this cycle unless you intervene, increase your income, reduce your expenses or a combination of the last two.

The fastest and least expensive way out of this situation is to consider bankruptcy. Let’s start with the basics.

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.

I’d suggest you first read How to Get Out of Debt. The Honest and Unvarnished Truth and The Truth About The Success Rates, Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy. They will give you a great overview of what we need to deal with to get you moving in the right direction.

Then use the free How to Get Out of Debt Calculator to review your options.

See also  Medical Student Debt Leads To Thoughts Of Suicide and Burnout

After that, come back here and comment about what seems to make the most sense and let’s discuss that.

Does that sound like a reasonable approach?

After you’ve done some homework here and a bit of soul searching I’d like to discuss the next step with you.

Bottom line, we need to intervene in the situation and allow you to take what you learned from the experience and do better moving forward. Bankruptcy may allow you to build your emergency fund, avoid garnishment and suit, and most of all to provide a safer environment for your son. And don’t be too worried about your credit. Right now it’s not great and it’s stupid easy to rebuild. Just read this.

Damon Day - Pro Debt Coach

Steve Rhode
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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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13 thoughts on “Our Credit Scores Suck, We Have No Savings, and We Are in Collections. – Tara”

  1. David Robert, I looked up the phone number you gave me and it goes to a “forensic mortgage audit” company. How odd…..

    I plan on being upfront about everything. We have nothing to lose but something to gain from this. At the very least, I can find out how we can stop the collector from taking me to court.

    Reply

    • Tara, you are welcome to call me at the number I provided anytime. As I said, any time I spend with you will be Pro-Bono, meaning, I will not charge you a dime. Yes, I own a Forensic Auditing Company, not sure why you would think that is odd, however you do NOT need an audit, what you need is an understanding of debt collection laws so you empower yourself and not be lead to or tricked by the debt collectors. I also work very closely with an X-Banker of 9 years. He has turned his life away from Banking and has been helping struggling homeowners for 14+ years. If you are not comfortable calling me I totally understand. Again, I have helped many people like you get through situations like your in, I have NEVER charged them a dime and I NEVER will. 

      Namaste,
      David 

      Reply

    • Tara, what state do you live in? Let’s see where you stand relative to the Statute of Limitations for this debt.

      Based on it being four years old, it’s quite likely that the original creditor has sold the account to a debt purchaser. However, there are some creditors who never sell their paper and retain ownership. So let’s sort out exactly who you are dealing with and where you stand in the process. Please let us know what state you live in, who the law firm is, and what “client” they are attempting to collect on behalf of.

      Reply

  2. Tara,
    If you have time and access to a computer do your research. Of course you found this site so you probably are. I went through a chapter 7 and while I won’t say I did it based upon this site, I did read a lot of comments oh here and did a lot of research through my state attorney general web site (Texas). In the end I found a lawyer I trusted and he did an excellent job for us. I actually was able to get a new house loan 12 months to the day after I filed. Three years down the road I got another loan at a very competitive rate. Bankruptcy is not the end of the world. We all have problems some foreseen and some not. It is how you handle yourself after the bankruptcy that will make the difference. I still get the ocassional call from a collector trying to come after a charged off debt. I followed some advice I picked up through this site and it helps a lot! Be careful about some of the comments you see on here. If they won’t identify themselves and they are against the majority of advice given  then I would be willing to bet ” a dollar to a doughnut” they are collectors of some sort. Get a good lawyer (a lot of them have free initial visits) and explore your options. In the meantime, if you get calls: 1. Record them (check your state AG site for requirements) 2. Dispute the claims; ask for ORIGINAL documents with your signature on them 3. Ask for a detailed of all fees and a history of all payments associated with said account 4) Ask the caller if they are an attorney 5) Require that any correspondence be from the attorney (if they say they are calling from or for an attorneys’ office 6. Ask for the attorneys’ license for your state to be included in the correspondence.  As for the fines I wound up not having to go through with it because a collector quit bothering me after I did what I just mentioned to you. But, I had found an attorney who specializes in sueing collectors and they get paid from the court fees. No money was required from me up front (or at all for that matter). By the way, do all correspondence via CERTIFIED Letter! Best wishes and good luck.

    W. Martin

    Reply

  3. Tara, if the car (Beatle) was a liability and you gave it away for that reason then I would suspect it is not going to be an issue. Hiding assets prior to a Bankruptcy is a big no no and that does not sound like what you did or are doing. I would disclose what you did to your Attorney and if it needs to be documented in some way as part of your Bankruptcy your Attorney should advise you. 

    If I were in your shoes I would not be stating publicly what or how you are using your cards.

    Reply

    • David,

      You have to stop putting your telephone number in the comments you post. It triggers the spam filter and your comments get deleted.

      If you want to help, do it publicly so all can benefit from the advice.

      Reply

  4. Here is another question: my husband had a 1969 Beetle. It was expensive to keep it maintained and we wanted to get rid of it. My mother wanted it though and we transferred ownership to her. We did this a month ago. Will this seem strange to our lawyer? I don’t want anything to screw up filling for bankruptcy. As it is we have to wait 90 days because I has to use our cards to get gas and food.

    Reply

    • Asset transfers prior to bankruptcy can be problematic. Just talk this over with your attorney. At the very least your mother could simply pay fair market value for the car and I bet that would solve the problem.

      Reply

  5. Dear Tara,

     

    Debt
    Collectors rely upon the ignorance of the alleged debtor in order to win. If
    you do not have some understanding of the laws that Debt Collectors MUST
    follow you are at a HUGE disadvantage. Debt Collectors use fear, guilt,
    trickery and lies to get you to collapse.

     

    The first
    lie a debt collector will tell you is they represent the Bank or Credit Card
    Company, this is simply not the case. If the debt has been written off the Bank
    or Credit Card Company must comply with GAAP (Generally Accepted Accounting Principles) and once written off the Bank
    or Credit Card Company sells the debt for penny’s on the dollar and that is how
    the Debt Collector obtains the alleged debt.

     

    Understanding the FDCPA (Fair
    Debt Collection Practices Act) and the FCRA (Fair Collection Reporting Act) is
    a Debt Collectors worst nightmare. They look at you as dumb pieces of low
    hanging fruit. A law that most Debt Collectors break is running a credit report
    against you to find out as much as they can to see if you have any assets. If a
    Debt Collector runs your credit report without your knowledge, permission or
    consent and you can prove it, it’s a $1,000.00 fine.

     

    I am not an attorney, I
    cannot give nor will I offer you any legal advice. Legal advice is different
    than legal information. I can share with you what others have done including
    myself to deal with Debt Collectors. I would be happy to talk with you and I
    will never charge you a dime to talk, EVER.

     

    The only thing I will ask
    is if I give you something to study you must follow through.

     

    David Robert

    Reply

    • Great, another “expert” who doesn’t understand what charge-off is, or the difference between the sale of an account or the assignment of same. Just what consumers need, another “debt warrior” dispensing dangerous and incorrect advice. Tara, please ignore this idiot and talk to an actual attorney.

      Reply

      • Well “guest” whenever you would like to raise your hand and debate me in an open forum just step forward and remove your mask so we can all see your face and I will debate you anytime with half my brain tied behind my back. I never said I was an “expert”, but I have sent some Attorneys (aka Debt Collectors) our of the courtroom with their tails between their legs. 

        Considering you know nothing about me and considering you want to resort to name calling it gives a bit of an idea what your about. Perhaps you would like to explain GAAP and what happens to an alleged debt on the 91 day without a payment so we all understand when Banks and Credit Card Companies sell their written off debt.Tara you cannot unring a bell, if a Debt Collector has purchased alleged debt from a Bank or Credit Card Company and they have run your credit report it is a $1000.00 violation (FCRA) – (per occurrence) and there is nothing they can do to undue it once you have proof via your credit report. 

        Debt Collectors (typically) win one of three ways if the case goes to court – #1 the alleged debtor does not show up for court and the debt collector wins by default judgement, #2 they get the alleged debtor to testify against themselves by answering questions with out having the Bank there to cross examine – #3 they enter bogus evidence into the case and the alleged debtor does not object thus allowing the trickery of the debt collector to get the evidence knowing that his/her evidence does not meet the rules of evidence nor the best evidence rule.

        Every debt collector who files a case against an alleged debtor does so fraudulently and they know it. 

        Here are some facts that Mr. Guest will never successfully debate –

        #1 – the Bank or Credit Card Company did not loan you their money.
        #2 – the Bank cannot prove they have been injured or damaged.
        #3 – there is Federal Law prohibiting a Bank from loaning its credit.
        #4 – the Federal Reserve is not Federal and there is and never has been a reserve.
        #5 – when Debt Collectors are trained they are often told that if they run a credit report on the debtor is is illegal and they will be subject to fines and are told it is a good idea to set aside funds to pay these fines when caught.
        #6 – the Bank cannot prove it loaned its asset, why?? it didn’t. 
        #7 – Debt Collectors NEVER bring original documents to court and have to resort to fabricating all documentation they try and pawn off on the court as originals.
        #8 – Debt Collectors rely upon the ignorance of the alleged debtor in order to win. 
        #9 – the Banks or Credit Card Company will never allow or bring their accounting books to court. 

        And finally “guest” you are going to have to clarify just exactly what bad advice I gave Tara? if studying and understanding FDCPA and FCRA laws is bad advice then I am guilty as charged. 

        Let games begin “guest”, I put my contact info out there, what about you? 

        Are you willing to help Tara for *free?

        I am. 

        David Robert

        Reply

  6. Thank you Steve for your fast response! It means a lot. My gut instinct is to file for bankruptcy but I’m at a loss as to which one would be best. I want to keep our car as it is our only one and we need it for work. My students loans won’t go away but they’re only $6,000. Chapter 7 is also a lot cheaper when it comes to lawyer fees. I’m not too fussed about paying back the debt. My concern is losing my car and whatever little I have in my 401k.

    Reply

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