Collector refuses to settle debt, is bankruptcy my only option?

Asked almost 6 years ago - Albuquerque, NM

I am a single mother of 3 small children. I am trying to pay off my debt. I am finding it impossible because of the outrageous amount of interest added by the collector. In May of 2008, I was served papers from The Law Offices of Ferrell & Seldin in Denver Colorado on behalf of Capital One for 2 credit cards, 2 years old that i originally owed less than a total of 2000.00 (for both). I called the lawyers office the following day and asked what the letters meant and what i needed to do. The woman I spoke with told me that they were judgements and that i needed to arrange payment with her to stop them from proceeding. She told me I now owed a total of a little over 5000.00. I could set up monthly payments of 350.00. I told her i cant afford that, but that could afford 100.00 a month. She told me that amount was not sufficient. My only other option was to come up with one lump sum as an offer of settlement on or before June 16, 2008. I was able to borrow 2000.00 from my mom and called the lawyers office everyday, sometimes several times a day for the month of June and July with no response from them. I then called the Albuquerque office and was told they could not accept any payment until they received an agreement from the corporate office in Denver. This went on for months. After no response i sent a certified letter to the representing lawyer in Albuquerque explaining that i have been trying to get ahold of them to offer my lump sum of 2000.00 and asked once again if they would accept it to pay off both credit cards. No response again. About 2 weeks later my employer was served with garnishment papers for one of the credit cards. A few weeks after that 98.00 was taken out of my bank account from my child support deposit leaving me a balance of 2.00.

Over the past 2 years the choice between food and shelter or paying Capital One was clear. However I would like to pay what i originally borrowed, again, less than 2000.00 but now the total is close to 8000.00 with penalty and interest. I simply do not make enough to afford 25% of my earrings being garnished. Which I assume will soon be 50% with the second card. My employer has yet to receive the second garnishment paperwork. The first packet was filled out and mailed to the court, but no garnishment has started yet.

I went to see a bankruptcy lawyer who told me its my only option. I have no other debt and i would hate to ruin my credit for 7 years over 2 credit cards.

I still have the 2000.00 i borrowed from my mom and with bankruptcy as my only option my dad said he could come up with the same amount. I thought i would try one more time before i fill out the bankruptcy papers to see if i could settle the debt. I called the representing lawyers last week and asked if they would accept 4000.00 to payoff both credit cards. I was told because they had a garnishment order for the first card and some sort of hold on my bank account for the second, the only amount they would accept was the total amount of 6486.74 plus interest.

My question is what do i do? I do not have that amount of money. I can not afford 50% of my earrnings being garnished. I work 25-30 hours a week and provide for 3 children on 1400.00 a month. Do i have ANY options other than bankruptcy?

Additional information

If i can come up with the full amount, does this remove the judgement? What steps do i take to make sure my payment is acknowledged by the court and credit bureau?

Attorney answers (2)

  1. Marcus Gregory Tiggs

    Contributor Level 8

    Answered . I am very sorry that you a facing such a frustrating situation. You are trying very hard to do what you feel is right, but you can't force the creditor to settle with you at a discount if they don't want to do it.

    I can understand that you don't want to ruin your credit by filing bankruptcy. However, I think you already have ruined it. Not only do you have the bad credit of failing to pay on the credit cards, but they have sued you, obtained a judgement, and they are garnishing your wages and attaching your bank account.

    The judgement will stay on your record for 10 years, just the same as a bankruptcy does, even if they accepted your settlement.

    I think the lawyer you saw has given you sound advice.

  2. Kevin W. Chern

    Contributor Level 11

    Answered . Before you make a decision about how to proceed, you should learn more about the wage garnishment laws in your state. I am not licensed to practice law in your state, but I can tell you that federal law limits garnishment in most cases to 25%--the exceptions are for things like child support. Thus, if 25% is the maximum allowable and it's already being deducted, a second order could not increase the amount of the deduction, only the duration of the deductions. Many states also have a minimum amount you must be left with after garnishment; this is commonly 30-40 times the minimum wage. However, in some states this is calculated based on federal minimum wage, and in others it is based on the state minimum wage, which may be higher.


    It's not clear whether you have additional debt that would be discharged in bankruptcy. If you have other debts that would be eliminated in bankruptcy, you may have other reasons for proceeding, but if this is the extent of your debt, you may want to negotiate further before taking that step. Figure out exactly how much of your income is subject to garnishment, and calculate how long it would take the company to recoup the full amount they're asking for. Chances are that it will be years, and it's to everyone's advantage to have this taken care of more quickly. However, since you've offered a lump-sum payment of a fairly large amount of cash, the attorneys may be assuming that you have access to more, or that you have assets they don't know about.


    Sometimes it's more effective when a third party makes an offer directly, since they have no obligation on the accounts and the creditor therefore has less (really no) bargaining power.

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