To file or to sit out statute of limitation

[Spartan]

Hi everyone, glad to come across this forum. Well informed and very supportive. Very nice.

Here is a summary of my situation. I currently have no income and no asset. I get free room & board in exchange for taking care of the house. Being that situation for over a year now. I owe probably $80,000 in cc, including an $8000 judgement (which one of CC's got against me). It has been over 4yrs and 4 months (I believe, not exactly sure about the months) since default.

I want to start over again. But this liability has been holding me back. Can't get job (considered security risk, with such credit profile). Can't get loan (duh!). Can't negotiate with potential investors. (duh!)

My option is to go Ch 7. Or I can wait 2 yrs and let the statute of limitation runs out, and then just negotiate with the judgment holder to settle and get that last one taken care of.

If I go with Ch7, I should be able to start over again in 4 months. But the Bk will be on record for 10 yrs. If I wait 2 yrs, no BK record, and the credit report gets cleaned up pretty much a yr (7yr statute of limitation for credit report) later, with the judgement settled (via negotiation, and hopefully).

Any advice, opinion, comment? Thanks!

P.S. Don't mean to be cheerful about this. It is just that I have been judgement proof, owing no assets and no wages CC can garnish. In some way, that is a relief. OTOH, I can accomplish a lot more than I am now. So, overall, I wish...... (I guess you all have heard that one before..)

BTW, am I correct in assuming that the reason other CC don't sue me, is b/c I already have a judgement against me? Thus if other sue, their claim will take second place to the existing judgement. As it turned out, the cc with the judgement, is not the largest creditor (in terms of $ owed.)

If you are curious as to how I got such a big CC debt, I used it to finance my business startup. Long story. I would rather not get into that.

[HHM]

BTW, am I correct in assuming that the reason other CC don't sue me, is b/c I already have a judgement against me? Thus if other sue, their claim will take second place to the existing judgement. As it turned out, the cc with the judgement, is not the largest creditor (in terms of $ owed.)

You're wrong about that...when it comes to judgments, the first to execute the judgment gets the money...for example, assuming you had a paycheck, and a 2nd credit card came along and got a judgment against and that 2nd creditor garnished your wages, that second creditor would get the money, not the first. The rule is, whoever executes first, not who gets the judgment first. The other creditors probably just know your not a good suit candidate.

Waiting out the SOL is really not a good move, just because they can't sue you, doesn't mean there are no negative consequences or further collection efforts. Also, with regard for "judgements"...most states allow for renewal of a judgment by the filing of a simple form with the court...so judgments can, in effect, last forever (however, not all states do this, so you would need to check with your local law).

If I go with Ch7, I should be able to start over again in 4 months. But the Bk will be on record for 10 yrs. If I wait 2 yrs, no BK record, and the credit report gets cleaned up pretty much a yr (7yr statute of limitation for credit report) later, with the judgement settled (via negotiation, and hopefully).

Wrong on this point too...the debts don't go away at the expiration of the Statute of Limitations...(and there is a way that many debt purchasers can "renew" the debt for credit reporting purposes, but it is controversial). However, so long as you owe money, those negative entries can sit on your credit report and continually be updated indefinitely. Extinguishing a collectors right to sue you to collect the debt (i.e. SOL), and extinguishing your contractual obligation to pay the debt are too different things, and the statute of limitations does nothing about the later. S.O.L is merely an affirmative defense to a lawsuit to collect the debt, it really has very little relevance outside that context.

If you want to bring "certainty" to your financial situation, then filing a chapter 7 is really the only way, and as you said, you get it all wrapped up in about 4 months. Your credit is already shot...there really is no benefit to not filing.

So the real question you need to ask yourself is between certainty and uncertainty...if you file Chapter 7 BK (and assuming all goes to plan and there are no problems), the debts get discharged, and your done. If you wait out the SOL, these debts will continue to dog you.

[emoney]

Most CC have jurisdiction in states that have statues up to 15 years to file lawsuits against you. I agree with the post before this one that Chapt 7 is for sure a good way to clear up your mess.
Another way is to focus on income and ususally debts can be paid for 10 cents on the $$$.
Thanks,
enoney

[HHM]

I suppose, given the length of time from first default, you would be a decent candidate for debt settlement (10 cents on the dollar is a bit optimistic even in this persons situations)...but that would cost you much more than filing BK.

Realistically, the best debt settlement you can hope is probably in the range of 25 cents on the dollar (or $20,000), or you could pay around $1,200 for BK, and get it all wrapped up.

[no_it_all]

My 2cents...

I waited for the SOL to expire on about 200K of unsecured debt, mostly credit cards. My situation was similar to yours, but I was never, repeat never sued. The good was: Never had to file BK, never paid a dime on any debt.
The bad was: Never filed BK, had crappy credit for about five or six years.

Note that I eventually did get credit scores high enough to put a 200K home purchase on credit cards, but it was L-O-N-G in coming.

If I were to do it again (and I am! duh!) I would go BK just so I wouldn't have to wait soooo long to get my credit built back up. BTW this is all info is anecdotal in nature, and most likely isn't even relevent to your very unique situation. Look at the posts, do some research, get a feel for how your creditors are playing you and make your best call....good luck..NIA

Ooh! a quick FYI edit: My negs ALL disappeared after a few years..by year six or so, they were ALL gone. That is how I ended up with another 200K of credit card debt!

[Spartan]

You're wrong about that...when it comes to judgments, the first to execute the judgment gets the money...for example, assuming you had a paycheck, and a 2nd credit card came along and got a judgment against and that 2nd creditor garnished your wages, that second creditor would get the money, not the first. The rule is, whoever executes first, not who gets the judgment first. The other creditors probably just know your not a good suit candidate.

Ok. Thanks.

Waiting out the SOL is really not a good move, just because they can't sue you, doesn't mean there are no negative consequences or further collection efforts. Also, with regard for "judgements"...most states allow for renewal of a judgment by the filing of a simple form with the court...so judgments can, in effect, last forever (however, not all states do this, so you would need to check with your local law).

In MN, SOL for judgement is 10 yrs and renewable for another 10 yrs. The holder can place a lien on real property.

My original plan is to negotiate a settlement after the SOL has expired on the rest of the cc. If I settle the judgement now, before SOL has expired on the rest, would that invite other CC to seek a judgement then?

Wrong on this point too...the debts don't go away at the expiration of the Statute of Limitations...(and there is a way that many debt purchasers can "renew" the debt for credit reporting purposes, but it is controversial). However, so long as you owe money, those negative entries can sit on your credit report and continually be updated indefinitely. Extinguishing a collectors right to sue you to collect the debt (i.e. SOL), and extinguishing your contractual obligation to pay the debt are too different things, and the statute of limitations does nothing about the later. S.O.L is merely an affirmative defense to a lawsuit to collect the debt, it really has very little relevance outside that context.

Well, if they have no legal recourse, there isn't anything they can do to enforce collection legally, right? They can ask. And you can ignore them. Right?

As regarding the negative entries, the SOL on those is 7 yrs. After that, the agencies are obligated to remove them, eventhough you mayhave to remind them to do so. Isn't that the law?

If you want to bring "certainty" to your financial situation, then filing a chapter 7 is really the only way, and as you said, you get it all wrapped up in about 4 months. Your credit is already shot...there really is no benefit to not filing.

So the real question you need to ask yourself is between certainty and uncertainty...if you file Chapter 7 BK (and assuming all goes to plan and there are no problems), the debts get discharged, and your done. If you wait out the SOL, these debts will continue to dog you.

You have a good point there. I just thought that since I am only 1 yr and a half (+or - a few months) away from SOL, and I can negotiate a settlement with the judgement holder, then the Bk may not be necessary. I don't know if any unforseeable consequences may arise from having a BK on the record for 10 yrs....

[Spartan]

My 2cents...

I waited for the SOL to expire on about 200K of unsecured debt, mostly credit cards. My situation was similar to yours, but I was never, repeat never sued. The good was: Never had to file BK, never paid a dime on any debt.
The bad was: Never filed BK, had crappy credit for about five or six years.

Note that I eventually did get credit scores high enough to put a 200K home purchase on credit cards, but it was L-O-N-G in coming.

If I were to do it again (and I am! duh!) I would go BK just so I wouldn't have to wait soooo long to get my credit built back up. BTW this is all info is anecdotal in nature, and most likely isn't even relevent to your very unique situation. Look at the posts, do some research, get a feel for how your creditors are playing you and make your best call....good luck..NIA

Ooh! a quick FYI edit: My negs ALL disappeared after a few years..by year six or so, they were ALL gone. That is how I ended up with another 200K of credit card debt!

Well, your experience is kind of similar to what I first thought would be the case, giving my understanding of the law, regarding the effect of expiration of SOL and the credit report listings dropping off after 7 yrs. I realize the judgement will have to be settled, instead of waiting for the SOL to expire in 6 yrs (4 yr into it already) and praying that they don't renew it. 25 cents on the dollars would come to $2000. Yike.

[Spartan]

Ohh yeah, I would like to thank everyone who offered input. Many thanks!

[HHM]

BK is less of a negative than what you have on your credit report right now...in fact, I would wager that your credit rating would IMPROVE as the result of filing BK (it does happen). For people with low scores and high debt, a BK will immediately increase their credit score, not decrease it.

Honestly, I think you are making too much out of filing BK, your in a far worse predicament now, and facing the prospect of waiting about 2 years for things to clear up, and probably another 2 years for things to actually improve. Why not file now, and get things going in your favor NOW. Generally, with good credit habits post BK, nearly all of the negative effects on your credit report as a result of a BK dissipate in about 2 years.

I just don't see any benefit to you (based on what you have posted so far) to waiting. IMO

[Spartan]

Thanks for your input. I am beginning to see the light now.

[HHM]

Although you are basically correct in the fact that after the SOL expires, creditors are obligated to stop reporting, that doesn't mean they necessarily will. After all, by then, you debt is in the hands of a secondary junk debt buyer. who probably paid 5 cents or less on the dollar for the account. Although it may be improper for them to report, they still due, and you are faced with the hassle of trying to clear it up...moreover, if you make even a payment of $1 or even acknowledge the debt, it can renew the statute of limitations.

So, all I am saying, the cheapest, easiest thing to do is to file BK now, and get things moving in the right direction.

[Spartan]

Thanks HHM. You opened my eyes to a new horizon!

I got a couple more questions.

1. It has been 4.5 yrs. I don't remember which cc firms I owe what. I haven't heard from anyone for years. And the old letters were all lost after moving around. Some of the CC's have been bought by other firms and some of the debts most likely have been sold to collection agencies etc. Would all the creditor info be in the Credit Report? I have never even seen a credit report before.

2. I have no wages and no income for the last several years and thus haven't filed tax return since 2002. What do I do about the tax return transcript required?

Not looking for legal advice, of course. Just any comment or input would be deeply appreciated.

[no_it_all]

2. I have no wages and no income for the last several years and thus haven't filed tax return since 2002. What do I do about the tax return transcript required?

You could file the taxes and just put down the income numbers (in your case zero) and give the trustee a copy of that. Might find old forms at the library.

[HHM]

Thanks HHM. You opened my eyes to a new horizon!

I got a couple more questions.

1. It has been 4.5 yrs. I don't remember which cc firms I owe what. I haven't heard from anyone for years. And the old letters were all lost after moving around. Some of the CC's have been bought by other firms and some of the debts most likely have been sold to collection agencies etc. Would all the creditor info be in the Credit Report? I have never even seen a credit report before.

2. I have no wages and no income for the last several years and thus haven't filed tax return since 2002. What do I do about the tax return transcript required?

Not looking for legal advice, of course. Just any comment or input would be deeply appreciated.

1. Yes, your credit report should contain the information, especially if all the debts are credit cards. Where you can run into to trouble with relying on the credit report is for medical bills, hospitals, Dr.'s and their collections agency typically do not report.

2. I know under the old law you could simply do an affidavit stating that you had no income. However, I am not sure that works under the new law...you could just file your back tax returns.


However, let's address an inconsistency first...in your first post you said you have not had income for about a year, now you say its been several years. Which is it? Even if you get free room and board, ppl typically have other expenses...how did you pay for those...Moreover, if you received free room and board in exchange for "taking care of a house", you may need to monetize that benefit for tax purposes, and the person who was doing this for you would probably need to issue you a 1040. And no doubt, you will have to explain this situation at the 341. Also, before I can fully endorse BK at this point, I would want to know a little more back story. i.e. Why did you suddenly stop paying your debts four years ago, how have you been able to live the last 4 years? on allegedly zero income.

[Spartan]

"I currently have no income and no asset. I get free room & board in exchange for taking care of the house. Being that situation for over a year now.."

Not about a year. By over a year, I mean several years. I probably should have just said several years and avoided the confusion.

As to why I stopped payment about 4 yrs ago, well, my business venture failed to take off. I ran out of savings and capital. Nothing to continue making payment with.

Over the last 4 yrs, room and board has been free, as I do basic stuffs around the house. Keeping the place clean, the garden tidy, etc. I live a spartan lifestyle. Don't own a car. Don't have a phone. Free internet access. No bills. None what so ever. What extra food/personal consumables that I needed, I supported that with odd jobs at restaurants where they paid in cash by the day. And you get free food when you work at restaurants too. I was practically getting fat at one point, while having actually no permanent place to stay. The irony of it is, I even managed to save a few dollars. I spent the free time doing research and studying and exercising to improve my physique.

You can live on a couple hundred bucks a month, and live very healthy, if you are smart enough and have the self discipline to live on healthy but not tasty food. I am in better health than I have ever been.

Time went by so fast, and it has been over 4 years....

The cc debts are not a big concern as SOL will run out in a year and a half. It is the judgement that hangs around, and compounding interest at around 8% a year, I believe.

I originally thought, hell, 4.5 yrs have gone by. What's another 1.5 yr? As for the judgement, they can have 1k for settlement, or nothing. They would probably go for the money, I think. So, in 2 yrs, the cr would start to drop off the SOL listings, and judgement is settled (hopefully). And no Bk on the book for 10 yrs...

But the BK will get things on an upward path in 4-5 months, instead of 2 yrs.