Lost job, don't own home or car. Should I pay CCs or let them sue me?

[JoyLegai]

I lost my job and my credit cards, mainly Discover, are getting fierce with me. It's been 60 days since my last payment. Because I have no income and large assets. (I live with roommates and they own the furniture, carpool, etc).

I don't know if I should take out of my retirement account and pay the interest, or let the cards sue me. I don't think they can garnish, well, anything? I just don't want to screw everything up before CHP 7 and look really bad. I have around $2000 saved up for filing bankrupcy and hate to dig into that because monthly payments are over $500 for all the cards...

[leonel9]

If you have no income and no assets that can be levied or garnished, bankruptcy may not be all that beneficial for you. If you are considered judgement proof, your creditors may be able to sue you and obtain a judgement, but they won't be able to collect on it. If you were to start working again, that income can be garnished.

In your post from August you stated that you made $11,000 annually and had $13,000 in credit card debt. If you will not be working again, I would not consider bankruptcy. If you will be working again, I would either:

• If you are trying to avoid bankruptcy, look into using the $2k you have saved and see if you can get the creditors to settle with you. For this to work, all credit card companies would have to agree to accept a settlement. Settlements usually involve a higher offer amount, but it may be worth looking into. Also consider that you will get a 1099 for any debt that is written off $600, so you would also need to consult a tax professional to see if you can not pay taxes on the write-off due to insolvency.
• Bankruptcy is a much cleaner option. Because you'll be below the median income, you should easily qualify for a Chapter 7 case. I would start by looking for a non-profit group like your local Legal Aid office. Often they offer free services that assist with Chapter 7 filings.

As far as bankruptcy timing goes, I would not file until you have a job and health insurance. The last thing you'd want to do is file for bankruptcy, and then incur a costly medical bill while not having medical insurance. If waiting to file means you are sued in the mean time, then so be it. You can include the judgement in a bankruptcy case.

[JoyLegai]

In your post from August you stated that you made $11,000 annually and had $13,000 in credit card debt. If you will not be working again, I would not consider bankruptcy. If you will be working again, I would either:

If you are trying to avoid bankruptcy, look into using the $2k you have saved and see if you can get the creditors to settle with you. For this to work, all credit card companies would have to agree to accept a settlement. As far as bankruptcy timing goes, I would not file until you have a job and health insurance. The last thing you'd want to do is file for bankruptcy, and then incur a costly medical bill while not having medical insurance. If waiting to file means you are sued in the mean time, then so be it. You can include the judgement in a bankruptcy case.

Thanks for the reply. Since the summer, I have REALLY tried to to not have to file. I was doing pretty well for a bit. But I lost 2 jobs because cuts and ran out of unemployment to live off of. I've had some medical issues too like you say to consider. The only GOOD thing is most of the medical debt, about 90% is gone because the hospital gave me financial assistance. But it's not like that with medications...I filled some for $200.

It's just crazy that I have been making payments, but the interest is just making the total stay the same, and even getting worse. I tried to talk with Discover, and they were very strict. Not mean or rude, but they could only reduce by 30% paid in full. That's where some retirement could come from my employers matched and I have built up a decent reserve. But I hate to touch it because I will need it .

It is scary to be sued. I just get anxious to think of it. I'm scared to even file for CHP 7 (why avoiding it) and with lawsuits, I'm sure it makes me look worse to the trustee. I feel like an irresponsible foolish criminal or something

[PANSYFACE]

You are not a foolish criminal! S>>T happens and the you rise above it. Everyone here has had some really crappy years where everything was going wrong, myself included.

I was sued by Amex, who, prior to my illness, loved me to pieces! Lawsuits happen and then are included in bankruptcy. Try to see this as a business decision. It helps take the emotion out of it.

I had weird scummy people driving by my house and taking pictures, the sheriff, who we knew personally , coming to serve papers etc Embarrassing, yes, but we lived through it.

We went through 2 years of NO income, selling our possessions and jewelry to pay basic bills like food.

Now we are both employed, got a loan mod, bought newer cars, settled almost all tax situations, working on the last one. Life is good! Good luck !

[bcohen]

Discover is a very litigious creditor. They will sue just about anybody who defaults on a debt to them, regardless of the likelihood of collecting on a judgment. Out of all my many debts which I quit paying on back in March of 2009, Discover was the ONLY creditor to sue, and it took them until September of 2012 to do that. I did not own any real estate, vehicles, or other major assets, and like you, I was unemployed at the time they sued.

That being said, do not dip into your retirement accounts in order to pay Discover, or any other unsecured creditor! That money is your future, and once spent, it is impossible to replace. Also, retirement accounts are fully protected in bankruptcy, and cannot be levied by judgment creditors outside of bankruptcy either.

I would just ignore Discover, and if they sue, I'd ignore that as well, as you have nothing to gain by responding to the lawsuit. You also have nothing to lose at this point by letting them have their judgment. Of course, once a lawsuit has been filed, you should stop putting money into a bank account, and keep the cash at home, and purchase money orders to pay bills.

When the time comes that you are gainfully employed once again, then you can file for Chapter 7 bankruptcy, and the debt owed to Discover will be discharged, which will render the judgment unenforceable.

[JoyLegai]

You are not a foolish criminal! S>>T happens and the you rise above it. Everyone here has had some really crappy years where everything was going wrong, myself included.

I was sued by Amex, who, prior to my illness, loved me to pieces! Lawsuits happen and then are included in bankruptcy. Try to see this as a business decision. It helps take the emotion out of it.

I had weird scummy people driving by my house and taking pictures, the sheriff, who we knew personally , coming to serve papers etc Embarrassing, yes, but we lived through it.

We went through 2 years of NO income, selling our possessions and jewelry to pay basic bills like food.

Now we are both employed, got a loan mod, bought newer cars, settled almost all tax situations, working on the last one. Life is good! Good luck !

Thanks for making me feel a bit better! Why would they come to your house like that?! That is very scary and seems invasion of privacy to keep coming and going like that. What are papers you were served? Is that when you have to come to court? I hope the sheriff had been kind to you, at least. I'm so happy you got to move forward. I hope for that too--just feels like a digging a hole deeper and deeper...

[JoyLegai]

Discover is a very litigious creditor. They will sue just about anybody who defaults on a debt to them, regardless of the likelihood of collecting on a judgment. Out of all my many debts which I quit paying on back in March of 2009, Discover was the ONLY creditor to sue, and it took them until September of 2012 to do that. I did not own any real estate, vehicles, or other major assets, and like you, I was unemployed at the time they sued.

That being said, do not dip into your retirement accounts in order to pay Discover, or any other unsecured creditor! That money is your future, and once spent, it is impossible to replace. Also, retirement accounts are fully protected in bankruptcy, and cannot be levied by judgment creditors outside of bankruptcy either.

I would just ignore Discover, and if they sue, I'd ignore that as well, as you have nothing to gain by responding to the lawsuit. You also have nothing to lose at this point by letting them have their judgment. Of course, once a lawsuit has been filed, you should stop putting money into a bank account, and keep the cash at home, and purchase money orders to pay bills.

When the time comes that you are gainfully employed once again, then you can file for Chapter 7 bankruptcy, and the debt owed to Discover will be discharged, which will render the judgment unenforceable.

I wonder why Discover is very sue happy. I have always had good customer service all these years, have had the card about 11 years now...so it feels bad to have tables turned. When sued, did they keep harassing you? I'm not sure what happens after I would decide to attend the court.

My concern also is that I have a Chase bank account. 2 of my credit cards are with them. Should I have to close my checking and get it at a different bank?

I REALLY want to keep my retirement like you say. Thanks!

[bcohen]

I suspect that the reason Discover is so sue-happy is because some or all of the law firms which they use work on contingency, meaning that Discover only pays them if they collect anything.

I quit paying all my debts "cold turkey" back in March of 2009, because my hours at work were being cut, the industry was doing poorly, and I expected to lose my job soon (which I eventually did) so I needed to conserve funds to pay living expenses.

For the first few months, Discover was no more aggressive than any of my other creditors. At first, they sent letters and made "courtesy calls" to let me know that I forgot to pay, then as time progressed, the letters became more threatening, and my phone was bombarded with robo-dialed collection calls. After 90 days with no payment, they sent a letter saying that the credit card account was being closed, and the entire balance was due now. By this point, I was no longer receiving phone calls from any creditors, because the phone number which they had was a cellphone, and it was turned off because I was no longer paying.

At approximately 5 months past due, Discover sent a letter via FedEx warning that if the debt isn't paid soon, it will move to charge-off status, and will be placed with an attorney for further collection. After the charge-off came and went, I received "pre-litigation" letters from a series of law firms, probably more than 10 in total.

Each law firm that the account was sent to started off with a "pre-litigation" letter, followed by a second collections letter which sometimes offered an "opportunity" to save money by settling for a percentage of the total due, ranging from 75% to 85% of the balance. Most of the law firms were located in other states, which meant that a lawsuit wasn't likely. The second law firm to receive the case, in early 2010, was located in the same city where I live. They didn't bother to sue, perhaps because they looked up my address and knew I was living in a 1-bedroom apartment in a poor neighborhood, so they'd probably never collect on a judgment.

Finally, in summer of 2012, the account was assigned to a law firm called Gurstel Chargo, which according to their website at the time, accepts cases on a contingency basis. They started out with the usual 2 or 3 collections letters, and even offered a discount of 25% if I could pay the debt at once. (Of course, I was unemployed and struggling to make ends meet, so this was out of the question.) Amazingly, even though checking my credit reports and doing an asset search should have told them that I had practically nothing, they decided to sue, and I was served in September of 2012.

I decided to fight the lawsuit, mainly to buy time so that I could spend down my non-exempt savings to file a "no asset" bankruptcy. I managed to drag it out for over 4 months as well as run up the plaintiff's attorney fees, which of course were added to the judgment. By the time the judgment was entered, I had practically nothing in the bank, and was using money orders to pay rent and other living expenses. Gurstel Chargo attempted to levy my bank account in March of 2013, but they didn't get anything because my balance was less than the state's exemption amount, which was $150 at the time. I filed for Chapter 7 bankruptcy in April of 2013, and included this judgment, which was never paid.