Should I allow credit card debt to go to collections (pay, taxes)
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I posted over a year ago on a thread called "Just found out Husband racked up 34K in CC debt." To make a long story short, after he "confessed" and we laid out a plan he has been paying close to 1200/month to this debt which is now down to around 20K. This was debt that was racked up without my knowledge and amounted to him charging for 3 years. I am staying in my marriage. I live in a community property state so the debt is mine.
We have 2 children and they are active in several activities. I refuse to cut back on what they want/need because of HIS debt. However, it is killing us to put this much toward the debt. I know he could put less toward it in order not to be scrambling each month with bills but I can't stomach the thought of having this debt. I am a fantastic money manager and was under the impression we were debt-free except for our house until I found out about this.
I do not consider this my debt (the state does, I don't.) I am at the point of just letting it go to collections and getting a settlement. I know it would destroy any credit we have left.
With all his charging I don't even have anything to show for it. It was for golf/beer/etc. Yes, 34K and nothing to sell. What would you do?
Well it's been a year and he's almost halfway done. Bad credit can hurt you more if you need a car loan, mortgage in the future. If you're really sure you don't need it, AND he doesn't have a job for them to garnish wages from, go ahead...
He's done it halfway, why not finish it off. Try and get 0% balance transfers, that will help with the interest.
I posted over a year ago on a thread called "Just found out Husband racked up 34K in CC debt." To make a long story short, after he "confessed" and we laid out a plan he has been paying close to 1200/month to this debt which is now down to around 20K. This was debt that was racked up without my knowledge and amounted to him charging for 3 years. I am staying in my marriage. I live in a community property state so the debt is mine.
We have 2 children and they are active in several activities. I refuse to cut back on what they want/need because of HIS debt. However, it is killing us to put this much toward the debt. I know he could put less toward it in order not to be scrambling each month with bills but I can't stomach the thought of having this debt. I am a fantastic money manager and was under the impression we were debt-free except for our house until I found out about this.
I do not consider this my debt (the state does, I don't.) I am at the point of just letting it go to collections and getting a settlement. I know it would destroy any credit we have left.
With all his charging I don't even have anything to show for it. It was for golf/beer/etc. Yes, 34K and nothing to sell. What would you do?
What is his is yours. This is what I think you should do:
1. Get marriage counseling so that you understand that mistakes he makes are also your mistakes. Or you could divorce him-- because this is an awfully big mistake for him to cover up.
2. Pay down the debt (at 1200/mo this would be only 17 more months before it's completely paid off)... It would be awfully stupid to let this go to collections...
I do not consider this my debt (the state does, I don't.) I am at the point of just letting it go to collections and getting a settlement.
If you own a home, there will be no settlement. If you don't own a home, there will be no settlement.
Debt collectors do not "settle" a debt. Their definition of "settled" is paid in full.
If you own a home, you have ZERO leverage, because all they have to do is file suit, obtain judgment, and slap a lien on the home. That means you cannot sell the home until the lien is satisfied.
If the credit card is solely in your name, it is your debt. If the credit card is jointly in your names, then it is jointly your debt. However, he could file bankruptcy and discharge the debt without harming your credit.
If you stop making payments, what will happen is you will receive lots of nasty-grams in the mail from the creditor, who will also bombard you at home and at work with telephone calls asking when you intended to pay up.
After 6 months worth of nasty-grams and telephone calls and your co-workers laughing at you behind your back and your boss/supervisor aggravated to death by the constant telephone calls, the credit card bank will, in accordance with federal banking regulations, close the account after 180 days and charge the debt off (the credit card bank has no choice in this matter, just as a bank or mortgage company has no choice and must foreclose after 120 days or violate federal laws).
At that time, the debt will be assigned to a collection agency. You can then negotiate a payment plan with the collection agency, but not the amount of the debt, because they will insist that you pay the full amount. If you own a home, you should expect to be sued so they can legitimize and guarantee their claim against you.
It is possible to negotiate directly with the creditor for a settlement, but that would require that you make a lump sum payment for a good portion of the debt. If that would happen (and it's very rare with credit cards) they can still assign the unsettled portion of the debt to a collection agency for collection (which would leave you in the same position), or they can forgive the unsettled portion, but then you must report the unsettled portion on your income taxes as unearned income and pay taxes on it. I would suggest, urge and insist, that you consult a tax attorney, because in doing that, you could seriously s-c-r-e-w yourself if the amount of unearned income put you in the tax bracket that activated the Alternative Minimum Tax. The end result would be that you could end up paying more in taxes than the amount of the unsettled portion of the debt you're required to claim as unearned income. The IRS won't play games with you, they'll immediately attach a lien to your home and seize your bank accounts if you get uppity with them.
All credit cards will take 70% no questions asked. But, they will report you as "settled" on credit report which is bad. If I represented Carlos Slim I could settle his credit card debt for 70%. So could Benny the pool boy.
Getting a credit card company to take below 50% is difficult if you are dealing with collectors. Best to let it go into litigation and then settle with a collection attorney. They will just sue the husband even though the wife may become liable if the bank proves a community property debt, but unless her name is on the statements she will not get sued. Respond to collection suit with tearful letter to the judge about H's problems and serve the collection lawyer by mail. Collection lawyers hate pro se cases. They will settle for less than the 50% if you show them you have no assets or equity.
Two points for others:
Keep your phone number but send it to voicemail directly. Get another phone number and give it to your friends and family, work, etc. Collectors never catch on.
Put your home in LLC by quit claim deed. Then the judgment will not be in the chain of title and you will still be able to sell or refinance. Form the LLC with Legalzoom or equivalent.
Oh, this thread could use a lesson in collection practices. Your collector (the one tormenting you), works from home and is paid based on how much he can collect. He either is shunted calls that answer or he has a population of numbers to call. Most collection calls are automatically sent to a collector if a person answers. Then, he gets the account info on the screen. That is why there is a one or two second delay in him responding when you say hello. If you hang up during this delay he does not know you answered and hung up, he just knows he got a dead call. 99 times out of a hundred he will not call you back.
If you promise to pay anything, or, God forbid actually pay anything, the number of calls to you will go up double or more. Collectors concentrate their efforts on people who respond to their calls. Don't ever respond in any way unless you have cash in hand and want to make a settlement right then. Always get a written offer to settle signed by someone purporting to represent the creditor. Their authority does not really matter. If they have your info from the bank and they say they can settle, the bank will not pursue it.
I. The Homestead - A Product of State Law
The Massachusetts Homestead Act allows a homeowner to acquire an estate of Homestead to the extent of $500,000 with respect to a homeowner's primary residence. This allows the owner to claim the first $500,000 of equity in his or her home above the mortgages that the owner has placed on the property. Homestead Declarations are for primary residences only and do not apply to vacation homes or investment property.
The following are exempt from the Homestead Law:
1. federal, state and local taxes, assessments, claims, and liens;
2. mortgages used to purchase the residence, and in the case of the Elderly Homestead, first and second mortgages held by financial institutions or others;
3. an execution issued from the Probate Court to enforce its judgment that a spouse pay for the support of a spouse or minor children;
4. upon an execution issued from a court of competent jurisdiction to enforce its judgment based upon fraud, mistake, duress, undue influence or lack of capacity;
5. debts contracted prior to the acquisition of the Homestead
There is also no protection for recovery of expenses for nursing home care paid for by the government.
Therefore, if you have a Homestead and you're in an automobile accident and your insurance is insufficient your home won't be exposed to the extent of $500,000. The same is true of dog bites, drowning in pools, slip and falls and professional liability claims. It is important to note, that Homestead protection is not a substitute for home insurance or any other type of liability insurance. These are separate and distinct types of protection. The Homestead protection will be effective after any liability insurance is used to pay for any judgments that are related to liability incurred under that particular insurance policy (e.g., home, automobile, etc.).
There are actually two sections of the Homestead Act. Under Section 1 all individuals may obtain a Homestead. Section 1A applies only to the elderly (more than 62) and disabled. A key difference between the sections is that Section 1A mentions obtaining a Homestead in manufactured mobile homes, while Section 1 does not. State courts have not yet interpreted whether the right to claim a Homestead in a mobile home is limited to the elderly and disabled. Also, Section 1 extends protection to the declarant's spouse and children, while Section 1A protects only the declarant's interest in the home. Where a Declaration is filed under Section 1, only one owner may file. Under Section 1A, all owners more than 62 should file a Declaration to protect their interests.
All Homesteads must be filed in the county in which the residence is located. To acquire a claim of Homestead for a mobile home under Section 1A, you must file at the city or town clerk's office in the city or town in which the mobile home is located. Massachusetts Homesteads are not automatic. A Declaration must be recorded to obtain Homestead rights.
It deepdns o the stae homestead laws. In many they can not go after your home but they can file a lien so as to get the debt when you seell . Otehr no lien but once you seell they can go after the asets gained from sell.Same as mnay sates have laws that prevent them gainign pension mnies which is why OJ moved to Flrida from california. But to get to the Ops question ;I would contimue to pay the debt ebcause your so close. 20k isn't worth the porblems you can see. it might go to collections and it might end in suit by credit card compoany. things ahve changed alot and good credit and lowering income to debt will be more important i the future. Just the abilty to get any loan at reasonable rates will depend on credit score and debt to income more. The debt isn't like to go away efecting that and may be prolong by a judgeemnt in court that can be refiled. The only real opiton worth nayhting is bankrupsy which it doesn't sound like your quailfied for really.
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