Please Help Being Sued by Collection Agency (credit card, student loan, debt)

[overmyhead]

I opened up a store credit card back in 2004 with a limit of $1500. After about 2 years late fees and interest accumulated to about $2000 and the minimum payment was too high for me to pay at that time. Since then they sold my account to a collections agency who somehow after 2 years is charging $3200.

The attorney they sent me to says I can pay $300/mo plus $800 in legal fees to stop a judgment from being entered against me.

I can't pay $300 per month so what are my options.

I currently rent a house, my car is upside down in the loan and I clear $2900 a month with expenses of $3,500 a month.

I have a school loan that is in default and 3 other collections agencies coming after me.

I also have back taxes I owe.

I had lost my business and income for over a year and that is why I got behind on everything.

I want to pay my debts but don't have the resources right now to do it.

What are my options? I mean if I somehow figured out how to pay the 300/mo what do I do about the other collectors that are going to sue me for what I owe them?

Thanks for any advice.

[Mircea]

Originally Posted by overmyhead

What are my options?

Nobody knows because you haven't provided any relevant information.

When did you stop making payments, or when was the credit card charged off? What state do you reside in? Is this the first communication you've had regarding this debt? How long ago did you receive notice?

[overmyhead]

The card was charged off in 2006. I reside in Arizona. I communicated with the collection agency a year ago and made some payment arrangements but was not able to complete them so they sent an attorney after me and I have to file an answer this week.

[texdav]

The additi0nal is probably interest and maybe a collection fee. You need to see a attorney.

[RowingMunkeyCU]

Bankruptcy.

[crunchtime]

Originally Posted by texdav

The additi0nal is probably interest and maybe a collection fee. You need to see a attorney.

Been there done that. Consult a bankruptcy attorney. If you had a home I would look at filing a Chapter 13. In your case Chapter 7 looks like the way to go. Can get rid of everything even taxes that were 3 years or more past due except for the student loans. At least that was the case before they changed the laws. Again talk to a attorney.

[sonarrat]

Originally Posted by RowingMunkeyCU

Bankruptcy.

Sounds like it. You don't have any significant assets to liquidate, so filing for bankruptcy protection might be the most painless way to get the mountain of debt off of your shoulders and allow you to return to normalcy. You probably will want an attorney to guide you through the process. Is your $3500 in monthly expenses exclusive of your debt payments? If so, it sounds very much like you need to downsize your life as you are living well beyond your means.

[sean98125]

Can you move out of your house and into an apartment to cut expenses? That will reduce the amount you have to pay for a roof over your head and for utilities.

Take a long look at how you are spending your money. Get the cheapest phone plan that you can. If you have broadband internet, it's time to say goodbye to that for a while. Cable TV? You can't afford it.

Check New Car Prices, Used Car Prices, Blue Book Value, Car Reviews - Official Kelley Blue Book Site to see what your car would be worth in a private sale. Call your finance company and tell them that you need to sell the car for whatever you can get for it and you'll pay back the difference. Or they can come pick it up. Then go get a $1000 beater to get you around until you can responsibly manage your finances. And get minimum coverage on the beater - you don't need collision, for example. Just liability.

Start talking to the collection agencies and start to offer them a settlement offer. You don't have a lot of money or any assets, so tell them that you will give them 30 cents on the dollar for the debt. They'll stomp and rant, but your only other option right now is bankruptcy, and that means they won't get a dime. They made a mistake extending credit to you. If they agree to the deal, then you need to get that in WRITING before you send them a dime. Do not give them access to your checking account - just send them a check when you have it in WRITING that your debt is clear once they cash the check. Keep that letter someplace safe forever. Your settlement offers should be based on the amount of the original debt, not on the amount of debt plus fees plus interest.

Get a part time job to earn some extra money to get on top of the debt. Flip burgers, say hi to people at Walmart, mow lawns, deliver newspapers... whatever it takes.

Stay the heck away from restaurants. No vacations. No take out. Take your lunches to work. Eat dinner at home. Start visiting websites like The Simple Dollar or Wise Bread | Personal Finance and Frugal Living Forums to learn how to live within your means.

[overmyhead]

I appreciate the advice about living within my means but what I need to know right now is what to do about this lawsuit. Do I fight it and hope that the judge will see that I cant pay the 300/mo and maybe make it more affordable? Also can the collection agency tack on 1000 bucks since it's was only 2K when they bought it???

[maf763]

I don't know that you have any defense for fighting it. People are giving the advice you need - see a bankruptcy attorney.