Best way to handle credit card debt when you can't pay minimum payments? (loans, company)

[SunInHair]

What is the best way to handle $50,000 in credit card debt when you are no longer able to pay the full minimum payments due? Plus I have $25,000 in loans. I'm disabled and on SS Disability plus a small retirement pension. Debts resulted from home construction, basic living expenses, and medical/prescription drug expenses. Read in another thread that one should *not* write to the credit card company to say you can't pay. Is it best to say nothing and just send in what I can or send nothing? I want to pay off my debts but just cannot pay their minimums. Not eligible for debt consolidation as my income is too low.

[suzie02]

How many cc in total? Is this a lot of small debts or a couple of large ones?

[SunInHair]

Originally Posted by suzie02

How many cc in total? Is this a lot of small debts or a couple of large ones?

$20K card
$20K card
$12K card
$2000 card
$18K loan
$12K line of credit

and owe IRS $100K, State $20K because I was forced to liquidate all savings and investments last year.

Some mess, eh?

[ChunkyMonkey]

I think you have to prioritize your debt. If you declare bankruptcy, you will not be able to discharge the IRS or state debt, I believe, while credit card debt can be discharged. So, since credit cards are unsecured, you should not even bother paying them and focus on paying off your housing/food expenses and then the IRS/state debt. Good luck.

[SunInHair]

Originally Posted by Ch/

I think you have to prioritize your debt. If you declare bankruptcy, you will not be able to discharge the IRS or state debt, I believe, while credit card debt can be discharged. So, since credit cards are unsecured, you should not even bother paying them and focus on paying off your housing/food expenses and then the IRS/state debt. Good luck.

Would it be best to just stop paying on the credit cards altogether, do not file for bankruptcy, and just work on payment for the IRS/State income tax? I figure my near-perfect FICO score as of a year ago is in the toilet or close to it already.

[berdee]

Originally Posted by SunInHair

Would it be best to just stop paying on the credit cards altogether, do not file for bankruptcy, and just work on payment for the IRS/State income tax? I figure my near-perfect FICO score as of a year ago is in the toilet or close to it already.

It is always possible that you could stop paying on the cards without filing bankruptcy. Since you are on SSDI they would not be able to garnish your SSDI if they do get a judgment, though you will need to take steps to insure that they do not seize the SSDI funds from your bank account.
Keep in mind that your SSDI can be garnished for back taxes.

If they do sue, it would be in your best interest to answer the judgment and show up for the hearing. Doing so you would have a much better chance of protecting your assets. Even though you are on SSDI, you would need inform the court of that. If you don't then you will probably see your bank account frozen or seized. Since your funds come from SSDI you will be able to have the seized funds returned, eventually.

If you have or had placed any money into your bank accounts that come from any other source then they would have a legal right to seize those funds if they win a judgment. You would have to provide proof of what was from your SSDI check and what was from other sources. If your bank account currently, or in the past, has/had co-mingled funds you would be better off closing that account and opening one that is strictly for the SSDI deposit. Then file a letter with the bank saying that the funds in that account are from SSDI only and exempt from seizure.

Of course, you could go on a cash only basis. Though if you receive SSDI by check then any protection you have from the government ends the second you cash the check.

If you are in New Mexico then if they do end up with a judgment, the judgment will be good for 14 years. It's possible that if you ever decide to file bankruptcy, just not yet, that you can wait to see if they do file suits (for those amounts they probably will)

I've said before, and I'll say it again, whether to file bankruptcy, or not, is a personal decision. While you might ask questions on places like this, or anywhere else, you should not run with what anyone says unless you have done your own research.

You should start by making a pro and con list. For a few examples:
If you do file bankruptcy before the credit cards are charged off, they will not be able to report those cards as being charged off on your credit report. (pro)
If you wait to file you may see charge offs, judgments and possibly(?) a bankruptcy reporting (con)
If you file then you need to learn how what you own falls under your states homestead exemption laws. (possible con)
If you file using a cut rate bankruptcy lawyer, you may end up with a much bigger mess than if you had never filed (very big con)

Anyway, you get the drift.

You should check the exemption laws for your state when filing bankruptcy, along with any other info that you can dig up.

Understand that anything you read should be taken as information only and should never take the place of the advice from a competent bankruptcy lawyer.

For a few bankruptcy informational links:

Look up your states exemption statutes:
Bankruptcy Exemptions - Homestead Exemptions. Assets kept in a Bankruptcy

Bankruptcy timeline:
Bankruptcy Timeline - Before Filing

Bankruptcy means test:
Nolo.com Bankruptcy Law and Information :: Free Bankruptcy Means Test Calculator


If you owe the IRS and state that much money and you are having difficulty in paying everyone, making sure the IRS and state are paid is much more important than making sure the credit cards are paid.

You made a comment that you recently had some home construction, that may hinder a bankruptcy. You need to discuss that with your bankruptcy lawyer if you decide to file.

Whether you file or not, let the cards go or not...do as much research, and thinking, as you can before you decide to do anything.

eta
Your retirement income may or may not be exempt from a credit card judgment, you would need to research that to see if that type of retirement pension is exempt or not.

[SunInHair]

Excellent suggestions, Berdee, thanks so much!

Originally Posted by berdee

It is always possible that you could stop paying on the cards without filing bankruptcy. Since you are on SSDI they would not be able to garnish your SSDI if they do get a judgment, though you will need to take steps to insure that they do not seize the SSDI funds from your bank account.
Keep in mind that your SSDI can be garnished for back taxes.

If they do sue, it would be in your best interest to answer the judgment and show up for the hearing. Doing so you would have a much better chance of protecting your assets. Even though you are on SSDI, you would need inform the court of that. If you don't then you will probably see your bank account frozen or seized. Since your funds come from SSDI you will be able to have the seized funds returned, eventually.

If you have or had placed any money into your bank accounts that come from any other source then they would have a legal right to seize those funds if they win a judgment. You would have to provide proof of what was from your SSDI check and what was from other sources. If your bank account currently, or in the past, has/had co-mingled funds you would be better off closing that account and opening one that is strictly for the SSDI deposit. Then file a letter with the bank saying that the funds in that account are from SSDI only and exempt from seizure.

Of course, you could go on a cash only basis. Though if you receive SSDI by check then any protection you have from the government ends the second you cash the check.

If you are in New Mexico then if they do end up with a judgment, the judgment will be good for 14 years. It's possible that if you ever decide to file bankruptcy, just not yet, that you can wait to see if they do file suits (for those amounts they probably will)

I've said before, and I'll say it again, whether to file bankruptcy, or not, is a personal decision. While you might ask questions on places like this, or anywhere else, you should not run with what anyone says unless you have done your own research.

You should start by making a pro and con list. For a few examples:
If you do file bankruptcy before the credit cards are charged off, they will not be able to report those cards as being charged off on your credit report. (pro)
If you wait to file you may see charge offs, judgments and possibly(?) a bankruptcy reporting (con)
If you file then you need to learn how what you own falls under your states homestead exemption laws. (possible con)
If you file using a cut rate bankruptcy lawyer, you may end up with a much bigger mess than if you had never filed (very big con)

Anyway, you get the drift.

You should check the exemption laws for your state when filing bankruptcy, along with any other info that you can dig up.

Understand that anything you read should be taken as information only and should never take the place of the advice from a competent bankruptcy lawyer.

For a few bankruptcy informational links:

Look up your states exemption statutes:
Bankruptcy Exemptions - Homestead Exemptions. Assets kept in a Bankruptcy

Bankruptcy timeline:
Bankruptcy Timeline - Before Filing

Bankruptcy means test:
Nolo.com Bankruptcy Law and Information :: Free Bankruptcy Means Test Calculator


If you owe the IRS and state that much money and you are having difficulty in paying everyone, making sure the IRS and state are paid is much more important than making sure the credit cards are paid.

You made a comment that you recently had some home construction, that may hinder a bankruptcy. You need to discuss that with your bankruptcy lawyer if you decide to file.

Whether you file or not, let the cards go or not...do as much research, and thinking, as you can before you decide to do anything.

eta
Your retirement income may or may not be exempt from a credit card judgment, you would need to research that to see if that type of retirement pension is exempt or not.

[debtmonger]

The IRS and state should be the priority after necessities. CC's are way down on the list. I would stop paying on the CC's.