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Asked almost 2 years ago - Dallas, TX
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My husband and I already have a judgement against us in Texas, We have gone through some very hard financial times (deaths in immediate family and major medical
problems). We used credit cards to pay for the financial obligations to meet these hardships. But now we have defaulted on these payments and owe a lot of different collection accounts. We are still financially buried by hardships and cannot afford attorney, What is your best advice-short of filing bankruptcy.
I realize you are asking for options other than bankruptcy, but when you describe your own financial situation as "drowning in debt," I can't help but think that bankruptcy would be best your option. I think there is a stigma associated with bankruptcy that makes people think that it is a worse option than it really is. I recommend you discuss your situation with a bankruptcy attorney if you haven't already to ensure that you understand the process and possible outcomes.
Short of bankruptcy, it can get pretty complicated depending on how much you owe, who you owe, and how far behind you are on your payments. I would start with attempting to negotiate a lower amount to pay in settlement. Determine what you could afford to pay and when you would be able to make the payments. In your offer (which should be in writing), you could provide a brief summary of your hardship- creditors almost always want to know what hardship you've been experiencing if they are going to take less money.
There are some things to keep in mind when negotiating with your creditors:
First, they would much rather receive a lump sum settlement, rather than an extended plan. If you can't do a lump sum, consider what you would be able to pay over a three month period.
Second, depending on the creditor and amount owed, some creditors may be willing to settle for 15% of the total owed or less. However, they typically will accept a low amount in cases where the debtor owes a large amount of money.
Third, make sure any offer you receive from a creditor or any acceptance of one of your offers is provided in writing. You never want to get into a "he-said, she-said" discussion if a dispute ever arises; you will want to be able to definitely prove what correspondence has been made.
Fourth, if you do get into an extended repayment plan, make sure that it provides that if you are current on your repayment plan, they cannot sue you to recover any amount. I have heard from many individuals who have said they entered into a repayment plan, where current on their payments, but were sued anyway because the creditor/collecting law firm wanted the full amount instead. I think it's a dirty practice and I think that from a legal standpoint, the repayment plan should supplant the original agreement, but it is a tactic some collections companies use.
Fifth, a creditor may not be willing to settle for an amount today, but may be willing to accept that same amount several months down the road if they have not received payment on the debt yet. Time tends to make creditors nervous. The longer you stay in default, the greater the chance that you file for bankruptcy in most cases, so creditors just want to get paid and they want to get paid sooner rather than later.
Finally, there is a statute of limitations regarding how long a creditor has to bring legal action to recover a debt. It varies by state, but assuming Texas law applies, the statute of limitations is four years. That means that if you haven't made a payment of any kind for four years and the creditor doesn't sue, responding to a lawsuit by saying the statute of limitations has expired is a complete defense. If a creditor isn't actively trying to collect on an amount alleged to be owed, they may have given up hope of ever collecting. If a creditor isn't actively trying to collect, you may want to consider if it's in your best interest to not try to settle the account.
This is a pretty lengthy response, but there are so many pitfalls and possibilities to consider when trying to settle debts. I just have to reiterate that bankruptcy may very well be your best option.
I really think you should speak directly to a "bankruptcy attorney." Even though we call ourselves, "bankruptcy attorneys," most of us will give you accurate and helpful information about all of your debt-relief options, including non-bankruptcy options. Some will even help you negotiate with creditors. I know you don't think you can afford an attorney, but you might be surprised when you actually speak to some, and the first consultation is almost always free. In fact, there are also many bankruptcy attorneys who offer pro bono (free) or very low fees to individuals who really can't afford to pay the standard fees. (I know, I'm one of them.) You may have to check with many attorneys to find the person who can help you, but I sincerely think you'll get the best answer to your question by talking to an attorney directly. If you'd like to talk to me over the phone at no cost and no obligation, you can find my phone number at the top of my website. I'll post the link below.
I think you need to "get real" and face the truth about your financial circumstances. Have you budgeted a set amount each month to pay off your debts? If you haven't got any money left over after paying your living expenses to pay debt, how do you expect to eliminiate the debts?
You may wish to begin by taking a class called "credit counselling" widely available on the internet to help you budget. Although this class is a requirement to file bankruptcy, if you complete this class, you are NOT required to file a bankruptcy. This will give you an objective view of your situation.
Hope this perspective helps!
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