I Lost My Job and Legal Advocates Wants to Settle My Debt. – Tammy

“Dear Steve,

I owe over $31,000.00 in credit card debt and I don’t know what to do?

I lost my job almost 2 months ago, my unemployment is finally coming through, but unemployment is only about 60% of what you was making at your job so its very hard to make ends meet, I’ve called my mortgage company & hopefully they are going to work with me and I have also called some of my credit card and one of them I called which is CITI absolutely will not work with me.

I know I owe this money and I asked them if on the card that the minimum payment is about $140.00 a month if I could please pay partial payments for now until I find a job. They said absolutely not and that I have been a great customer and have always been on time and never missed a payment and so I really don’t understand why they won’t work with me.

About 6 months ago or so I got a postcard in the mail from some place that would take my credit card debt and work with the C C companies and get them to settle and I would just pay the company that sent me the postcard a payment each month which has to be directly taken out of my bank acct and everything would be fine and I woud supposedly be out of debt in 3 years.

I decided to do it and stop paying my credit cards as they advised me and about 2 weeks before they was going to take a payment out I cancelled because I DID NOT have a good feeling about the whole thing. Now I’m even more in debt and out of work and I don’t know what to do. I amj the sole supporter and fortunately I don’t have any children at home, but I still can’t pay all these CC bills.

My question is what do you recommend I do since the CC companies won’t work with me? I received another one of those agency’s that supposedly help you to become debt free, in fact they are the ones that verified just how far I am in debt. The name of the place is “Legal Advocates” and they state they are “State of Utah Licensed” which made me feel a little better than the other place because I live in Utah. That other place was all over the country I think.

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Anyway Legal Advocates has advised me that after reviewing my situation, and based on past results, (whatever that means) because I have never contacted them, it has been determined that I can resolve this distressed debt for $10,018.00! It seems to good to be true since they advised me that I owe $31,307.00.

Have you ever heard of Legal Advocates and what do you recommend I do? Would it be better to file chapter 7 bankruptcy or what? I forgot to add that I am currently going to school, and even though I am getting help with that via grants & hopefully a scholarship, I’m probably still going to have to put part of it on Student Loans.

I know that they can’t be claimed in a bankruptcy and I don’t want to include them. I just need to get rid of this out of control credit card debt!!!

What do you advise Steve? I trust you & read your articles all of the time and you also gave me excellent advice before! Please help!

Thank You,

Stressed out Tammy”

Woman in safari hat looking through binoculars

Dear Tammy,

Legal Advocates is such a generic name it’s hard for me to take a look at the right company. Maybe you can post their web address, telephone number, or physical location in the comments below.

Regardless, I think the issue here is best addressed by taking one more step back. You’ve said you’ve taken a big hit on income with unemployment. At this point we don’t know if you’ll even be able to make just your basic living expenses on unemployment. And we also don’t know how long the unemployment will last or if you’ll find a job before it expires.

Frankly, anyone selling you a debt repayment program at this stage would be nuts and I would severely question their advice.

You have both no expectation of resumed regular income or finding a job before your income runs out. Any payments you make now, either from temporary unemployment or robbing your retirement accounts would be ill-advised. It would be foolish.

I don’t get the feeling you have a lot of cash laying around or an emergency fund you can tap to get by. If you did then maybe my advice would change.

But for the interim, if unemployment is just going to cover your living expenses and not much more it does not make logical sense to enter any repayment plan at this time. If you do manage to have anything left over from unemployment after paying for basic expenses, save it for an emergency.

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You’ll have to stop paying your unsecured creditors so you can fit your life inside your reduced income. Once you fall behind you will wind up in collections. However you should not fear the collector. Read How to Deal With Debt Collectors.

Then I would focus all your time and life energy into finding a replacement job. Once you find the job and income starts to roll in again we can then look at the situation and decide what the best path to follow is at that point.

So my advice at this point is do nothing and focus on getting a job. And oh yes, don’t let the collection calls that will come freak you out.

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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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