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Author: BossGman2 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308881  
Subject: Credit Card Debt Date: 12/10/2013 8:40 PM
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Well like so many of us at age 62 now I am one that is approaching the end of a working career top point. Then the jobs that will be available are much lower in salary. I have 45,000 in Credit Card (CC) debt. I have spoken with an attorney and he and I agree I will not have the means to pay it off. We had only a brief conservation and for the past 20years I have made all my payments on time and not used the card in the past 24 months.

A- What are my options?
B- What is the likely hood of the CC organizations doing a given suggestion.
C- What is the down side

I drive a car worth 2,800 dollars and it is paid for. I live have no house payment. My spouse works too and is my age. Her annual income is 30,000 per year. My annual income is 60,000 per year.

D- Will they give me a large break or will I need to erase it all?
Is there a calculation that is used to see what the CC organization can obtain from me Max per month?
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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307560 of 308881
Subject: Re: Credit Card Debt Date: 12/10/2013 9:33 PM
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BossGman2,

You wrote, Well like so many of us at age 62 now I am one that is approaching the end of a working career top point. Then the jobs that will be available are much lower in salary.

What do you mean? Are you loosing your job because of your age? With few exceptions, age discrimination is (supposedly) illegal in the USA.

Also, I have spoken with an attorney and he and I agree I will not have the means to pay it off.

So a lawyer thinks your bankrupt? What a surprise. Bankruptcy lawyers have a financial motivation to advise their clients that they should file bankruptcy.

And, We had only a brief conservation and for the past 20years I have made all my payments on time and not used the card in the past 24 months.

Can't you pay more than the minimums? If no, why not? Have you been carrying this debt for 20 years?

Also, A- What are my options?

1. Pay your obligations, or
2. Default.

#2 by itself doesn't mean they won't get the money anyway. It depends on where you live, what you're worth and how much you make.

And, B- What is the likely hood of the CC organizations doing a given suggestion.

What does that even mean?

Also, C- What is the down side

You haven't proposed a course of action, so this question seems misplaced.

And, I drive a car worth 2,800 dollars and it is paid for. I live have no house payment. My spouse works too and is my age. Her annual income is 30,000 per year. My annual income is 60,000 per year.

Good for you. Sounds like you have a reasonable household income. Why are you in debt at the age of 62?

Also, D- Will they give me a large break or will I need to erase it all?

Why would they do that? What are you asking here?

Finally, Is there a calculation that is used to see what the CC organization can obtain from me Max per month?

Are you asking about wage garnishment? Federal law limits wage garnishment at 25% of your paycheck. States often restrict garnishment further for general obligations.

In bankruptcy, the court will award the creditors whatever the state allows from whatever assets you have today - most pension assets are excluded by federal law. If you're wanting to file, it's best to ask your attorney for specifics in your area - not a message board.

- Joel

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307561 of 308881
Subject: Re: Credit Card Debt Date: 12/10/2013 10:33 PM
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BossGman2,

Are we revisiting your first thread from Christmas 2011? You seem to be asking the same thing again.
http://boards.fool.com/chapter-7-or-chapter-13-29747296.aspx...

Or are we revisiting the thread last year about your nephew? (This was really about your nephew, wasn't it?)
http://boards.fool.com/credit-card-debt-best-approach-303038...

BTW, what happened to that $100,000 gift you were asking about last year?
http://boards.fool.com/tax-challenges-gift-30890707.aspx?sor...

I'm assuming given your earlier threads that you were expecting / hoping to receive funds from a parent ... and from this post that those funds never materialized.

- Joel

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307562 of 308881
Subject: Re: Credit Card Debt Date: 12/11/2013 12:44 AM
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Well like so many of us at age 62 now I am one that is approaching the end of a working career top point. Then the jobs that will be available are much lower in salary.

Are you planning on quitting? Have you been given notice of a layoff? Why are you assuming your income is decreasing?

I have spoken with an attorney and he and I agree I will not have the means to pay it off. We had only a brief conservation

Why not? Are you planning on declaring BK? Or are you going to try to just quit paying?

I have made all my payments on time and not used the card in the past 24 months.

Then you having been paying the debt down? How much has it decreased in the past 24 months?

A- What are my options?

- Pay the debt off
- Quit paying and deal with debt collectors
- Go for credit counseling and execute a plan to pay off your debt
- Declare bankruptcy

I drive a car worth 2,800 dollars and it is paid for.

Different states have different rules on how much value in auto equity you are allowed to keep in BK. $2800 is not a high value, but because many debtors have big car loans, they don't even have as much equity as you do. You probably want to check your state's law on the value of the auto you can keep in BK.

I live have no house payment.

Do you own the house you live in? If you have equity in a house that is above your state's limit in BK, you may be forced to sell your house, or borrow against your house to pay other creditors if you don't want to sell.

My spouse works too and is my age. Her annual income is 30,000 per year. My annual income is 60,000 per year.

On $90k a year with no house payment and no car payment, why haven't you been able to pay off your debt? What are you spending your money on?

Even if you get rid of your debt through BK, if you can't live on $90k a year without having a house payment and without having a car payment, how are you planning on supporting the same lifestyle in retirement, or when you end up in one of those lower paying jobs? After all, minimum payments on $45k in debt at the absolute max (30%+ rates) is unlikely to be more than $1350/month. That's only $16,200/year, or 27% of your annual income, 18% of your combined income. What are you spending the other 73% of your income (82% of your combined income) on if you don't have a house payment and you don't have a car payment?

B- What is the likely hood of the CC organizations doing a given suggestion.
C- What is the down side
D- Will they give me a large break or will I need to erase it all?


Well, the answers to these questions all depend on the solution you choose to pursue. You can examine your lifestyle and choose to make changes in order to pay it off yourself. You can erase it all by declaring BK. By executing a debt payoff plan by using credit counseling, you might be able to get some debt forgiveness or interest rate breaks from your creditors, or, maybe not, with your income. You can deal with debt collector if you choose to just quit paying.

Is there a calculation that is used to see what the CC organization can obtain from me Max per month?

If you choose to just quit paying and ignore the debt, they can garnish your wages. As Joel indicated, the federal maximum on garnishments is 25%, but states also have rules on the amount that can be garnished. For your income, that would be $15k/year. Depending on the fees and interest that you will be charged for the credit card company to execute the garnishment, you might get it all paid off in 5 or 6 years. If your wife is joint on any of the accounts, they could garnish her wages, too. That would add an extra $7.5k/year to the mix, and maybe drop your payoff time by a year or two.

If you choose BK, your assets, subject to state limits, are all up for grabs to pay off the debt.

If you choose to go through credit counseling, they will work with you to set up a budget and make payments on the debt. However, with no house payment and no car payment, you don't seem to have a lot of fixed expenses. That would meant that most of your income, other than taxes, would probably be looked at as being available for repayment, especially since your wife's income should be available to provide food and other necessities. If you could put $30k/year (50% of your income, 1/3 of your joint income) towards debt repayment, you should be able to repay the debt in less than 2 years, and that would still leave you and your wife $60k annually for taxes and all living expenses. Since you don't have a house payment and you don't have a car payment, my guess is that many credit counseling agencies would think that's a workable budget for most couples. Why wouldn't it be for you?

AJ

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307563 of 308881
Subject: Re: Credit Card Debt Date: 12/11/2013 2:19 AM
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Then you having been paying the debt down? How much has it decreased in the past 24 months?

Okay, by reading the thread from Christmas, 2011 that Joel linked to, I got my answer. Apparently, you had $50k in debt 2 years ago (although you never confirmed that you had actually added up your debt, and you started out saying you had $40k, so it's not really clear). You now say have $45k in debt. If you really had $50k back then, that means you have managed to pay off only $5k in 2 years.

Which leads AGAIN to the question - what are you spending your money on?

With $90k in combined income, or even $60k in your individual income, you should have made much more progress on paying down $50k in debt in 2 years, if you really haven't been using the credit cards and you really only had $50k in debt back then.

I suspect you either don't have a grip on your spending, or you don't have a grip on the real amount of debt you have. In either case, declaring BK is unlikely to provide a long-term fix for you unless you manage to improve your grip on both issues before your BK is finalized.

Paying off the amount of debt you had 2 years ago on the income you have should have been possible in the last 2 years if you wanted to pay it off. Apparently you don't, since you don't seem to have made an effort to live enough below the means that you have had for the last 2 years in order to make any more progress on the debt than paying the minimum payments.

You seem to be asking for a miracle - trying to find a way that your debt will magically just 'go away'. Sorry, that kind of magical thinking isn't well thought of on this board. You aren't going to get any answers that are any different than the last times you asked questions for either you or 'your nephew'.

AJ

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Author: Windowseat Big funky green star, 20000 posts Top Favorite Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307564 of 308881
Subject: Re: Credit Card Debt Date: 12/11/2013 9:47 AM
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However, with no house payment and no car payment, you don't seem to have a lot of fixed expenses.

Minor quibble here, AJ. I know he said no house payment, but he might have meant no mortgage, but he's paying rent. That's something we might want clarified.

If the rent is very high, he might want to look at downsizing as a way of cutting costs.

Nancy
who took the cheapest decent apartment she could find.

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Author: tconi Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307565 of 308881
Subject: Re: Credit Card Debt Date: 12/11/2013 9:59 AM
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I see that others have offered plans and answered questions -

I have 45,000 in Credit Card (CC) debt. ...I will not have the means to pay it off. We had only a brief conservation and for the past 20years I have made all my payments on time and not used the card in the past 24 months.

A- What are my options?
B- What is the likely hood of the CC organizations doing a given suggestion.
C- What is the down side


A- sucking it up and paying it off
OR
Offering a settlement

If you settle
C- your credit will be trashed and you will have to NOT live beyond your means
A/B - until you quit making payments, the CC companies won't negotiate with you AT.ALL.
You have to STOP paying for 3-6 months (and trash your credit) in order for them to pay attention.
At that time you no longer agree to anything on the phone- you request and conduct all exchanges IN WRITING.
You can offer to settle for about 20-30% of your total.
WHen you do that, the CC company will either want that amount all-at-once, or in a maximum of 4 payments.
If you are even ONE MINUTE late on those payments, all bets are off and you go right back to the original balance and at a terrifying interest rate.

all that- PLUS- you will get a 1099 for that year for the "forgiven" balance. Be prepared for the tax liability there.
(example- you settle your ~$45K balance for $20k, you will get a 1099 for $25k)

I am not encouraging these actions, just providing answers.


peace & options
t

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Author: mtr Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307566 of 308881
Subject: Re: Credit Card Debt Date: 12/11/2013 10:47 PM
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Why don't you go find a part time job or work temp in the evening. Keep trying everywhere until you land the job and pay off this awful debt.

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307567 of 308881
Subject: Re: Credit Card Debt Date: 12/12/2013 12:24 AM
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I know he said no house payment, but he might have meant no mortgage, but he's paying rent.

Yeah, maybe. Or he could be living rent-free in a house owned by his father, who he seems to be expecting money and/or a house from when his father dies, if not sooner.

When someone who does pay rent says something like "I have no house payment" while not mentioning "I pay rent" - that's just another point in favor of the "have no grip on financial reality" score.

AJ

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Author: Windowseat Big funky green star, 20000 posts Top Favorite Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307568 of 308881
Subject: Re: Credit Card Debt Date: 12/12/2013 12:29 AM
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When someone who does pay rent says something like "I have no house payment" while not mentioning "I pay rent" - that's just another point in favor of the "have no grip on financial reality" score.

From one of my posts on his first thread:

"You haven't explained how the debt happened; whether it was just regular living above your means, a series of expensive toys, travel, or something else, but it appears that some of the problem is not understanding finances and debt."

Nancy

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307569 of 308881
Subject: Re: Credit Card Debt Date: 12/12/2013 12:32 AM
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When someone who does pay rent says something like "I have no house payment" while not mentioning "I pay rent" - that's just another point in favor of the "have no grip on financial reality" score.

From one of my posts on his first thread:

"You haven't explained how the debt happened; whether it was just regular living above your means, a series of expensive toys, travel, or something else, but it appears that some of the problem is not understanding finances and debt."


Yeah, it's a real blowout score.

AJ

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Author: Gingko100 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307570 of 308881
Subject: Re: Credit Card Debt Date: 12/12/2013 10:32 AM
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Everyone has a house payment, unless they are a dependent. Owners have at least taxes to pay (and insurance if they are wise), and renters pay rent.

Even when my home is 100% paid off, I will be paying $1K a month at least on it.

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Author: BossGman2 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307576 of 308881
Subject: Re: Credit Card Debt Date: 12/17/2013 2:41 PM
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When I am 64 (in 18 months) I will have an annual income of 36,000. Own no home. I will have a car worth 8,000. I will have a IRA from my employer (they cannot touch). Now based on this what are the best options because I will not be gainfully employed to make more that this salary. At 65 I will be on Social Security which pays both of us 37,000 per year. What is the best option when on Social Security. Home interior poessions less than 6000. No additional property. Just SS and IRA from employer. Medical Insurance cost of 850/month.

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Author: BossGman2 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307577 of 308881
Subject: Re: Credit Card Debt Date: 12/17/2013 2:49 PM
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To clarify it appears you understand some law:

If you settle
C- your credit will be trashed and you will have to NOT live beyond your means----- how long
A/B - until you quit making payments, the CC companies won't negotiate with you AT.ALL.
You have to STOP paying for 3-6 months (and trash your credit) in order for them to pay attention. really typical??
At that time you no longer agree to anything on the phone- you request and conduct all exchanges IN WRITING.
You can offer to settle for about 20-30% of your total.--- have you seen percentages before in the 10-15%???
WHen you do that, the CC company will either want that amount all-at-once, or in a maximum of 4 payments.
If you are even ONE MINUTE late on those payments, all bets are off and you go right back to the original balance and at a terrifying interest rate.

all that- PLUS- you will get a 1099 for that year for the "forgiven" balance. Be prepared for the tax liability there.
(example- you settle your ~$45K balance for $20k, you will get a 1099 for $25k) ---- therefore my earned income will increase by 25,000 for that calendar year???
Most of all thanks for the frank discussion. None of these choices are easy and this is a old debt from a long way back. Thank you

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307578 of 308881
Subject: Re: Credit Card Debt Date: 12/17/2013 3:59 PM
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When I am 64 (in 18 months) I will have an annual income of 36,000.

Why? Are you losing your job? Are you quitting your job? Do you have to retire because of age limitations on your job? If you have a choice to continue working, you probably want to consider that option.

At 65 I will be on Social Security which pays both of us 37,000 per year.

So, it looks like your income going forward is going to be in the 36k - 37k range. In that case, I would strongly suggest that RIGHT NOW you need to start living like your income is only $36k and devote the rest of your income to paying off your debt and, once you accomplish the debt payoff, adding to savings. If you can do that for the next 18 months, you should be able to pay your debt off, have a nice savings account for emergencies, replacing cars, etc. and you will be used to the standard of living that you will be forced to live once you hit 64/65.

AJ

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307579 of 308881
Subject: Re: Credit Card Debt Date: 12/18/2013 12:11 AM
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C- your credit will be trashed and you will have to NOT live beyond your means

how long

Your credit being trashed? The derogatory marks will stay on your credit for up to 7 years and 180 days after the initial missed payment that leads to a write-off or settlement. A Chap 7 bankruptcy will remain for up to 10 years. A Chap 13 bankruptcy can actually help your credit a little initially, as the debts are put into a 'repayment' status, but you will need to keep to your repayment plan.

NOT living beyond your means? Probably the rest of your life, if you don't want to get into a cycle of being a serial BK declarant. Assuming you declare Chap 7, you are allowed to declare BK again 8 years after your case is dismissed. Assuming the first case takes 6 months - 2 years from the initial filing to dismissal, you can get into a cycle of declaring BK every 8 1/2 - 10 years if you want to continue to live above your means. However, each time you declare BK, you will probably find it harder and more expensive to find someone who will lend you money.

A/B - until you quit making payments, the CC companies won't negotiate with you AT.ALL.
You have to STOP paying for 3-6 months (and trash your credit) in order for them to pay attention.


really typical??

If you are paying, what incentive does the CC company have to negotiate a deal with you? They are happy to let you continue paying. It's generally only after they see that they are likely to not get their money back from you (because you've stopped paying) that they will start to make deals with you. It might not take a full 3 - 6 months of not paying, but coming to a settlement on the debt will also trash your credit, as the debt was "settled", not "paid as agreed".

You can offer to settle for about 20-30% of your total.

have you seen percentages before in the 10-15%???

I've seen stories with settlement percentages like that, but I don't know how reliable the sources are. It's more likely that you will end up paying closer to 50% of the current balance, including fees and interest.

(example- you settle your ~$45K balance for $20k, you will get a 1099 for $25k)

therefore my earned income will increase by 25,000 for that calendar year???

Well, if you get 50% of your $45k in CC debt forgiven in one year, your unearned income would increase by $22.5k. (Earned income comes from employment - forgiven debt is not employment. However, all income - earned or unearned - must be declared on your tax return.) At a 25% Federal marginal rate, that would mean you will owe the IRS an additional $5,625. In addition, if your state has an income tax, you will owe them more money, too. In the unlikely event that you get the 10% settlement you are hoping for, your income would increase by $40.5k. At a 25% marginal rate, that's an extra $10,125 you owe to the IRS. At a 28% marginal rate, it's an extra $11,340.

AJ

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Author: tconi Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307580 of 308881
Subject: Re: Credit Card Debt Date: 12/18/2013 2:26 AM
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To clarify it appears you understand some law:

Not a lawyer, don't play one on TV, but have been down a similar road.

C- your credit will be trashed and you will have to NOT live beyond your means
-----
how long


Credit takes 7 ish years to rebuild
Living Below your means- you will have to do that forever

You have to STOP paying for 3-6 months (and trash your credit) in order for them to pay attention.
---------------------------
really typical??


Yes, Typical. Yes, Really.
Just as people who can see that they are going to be in trouble try to negotiate with their mortgage holders while they are still making payments.
Most get nowhere until they have stopped paying for several months.

You can offer to settle for about 20-30% of your total.
-----
have you seen percentages before in the 10-15%???


I, personally, have not.
Does not mean that it cannot be done.
Start with an offer and go from there, worst that the CC does is negotiate the settlement amount.

(example- you settle your ~$45K balance for $20k, you will get a 1099 for $25k)
----
therefore my earned income will increase by 25,000 for that calendar year???


Yes, Yes, it will.
Not only will you have a tax liability on that amount, but also the proportional amount (and I am sure someone-besides-me has the exact percentage) of liability that goes towards Social Security and Medi-Care.
So ball park estimate is about a THIRD of that "forgiven amount" is a tax liability.
Whether this is actually out-of-pocket depends on the rest of your tax situation.

peace & not fun
t

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Author: tconi Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307581 of 308881
Subject: Re: Credit Card Debt Date: 12/18/2013 4:19 AM
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how did I not read all the responses?

peace & knew someone else would have details covered
t

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307582 of 308881
Subject: Re: Credit Card Debt Date: 12/18/2013 5:13 PM
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aj485,

BossGman2 wrote, A/B - until you quit making payments, the CC companies won't negotiate with you AT.ALL.
You have to STOP paying for 3-6 months (and trash your credit) in order for them to pay attention.

really typical??


To which you replied, If you are paying, what incentive does the CC company have to negotiate a deal with you? They are happy to let you continue paying. It's generally only after they see that they are likely to not get their money back from you (because you've stopped paying) that they will start to make deals with you. It might not take a full 3 - 6 months of not paying, but coming to a settlement on the debt will also trash your credit, as the debt was "settled", not "paid as agreed".

Actually I've heard of creditors taking longer than 6 months. Also, penalty charges and penalty interest rates will cause the debt to skyrocket out of control as he waits. I've heard of cases where the debt has doubled while it was in collections. Settling for 50 cents on the dollar at that point wouldn't seem like much of a victory.

I would also note that BossGman2 lives in Tennessee. According to Nolo.org:

Tennessee law limits to how much money can be garnished from your paycheck. The purpose of the law is to ensure that you have enough income left to pay for your living expenses.

Federal law places limits on wage garnishment amounts. Tennessee’s wage garnishment law protects the same amount of your income as the federal garnishment law, but allows you to protect additional income if you support minor children. In accordance with Tenn. Code Ann. § 26-2-106, below is the most that a creditor can garnish from your wages in Tennessee:

- 25% of your disposable earnings for that week, or
- the amount by which your disposable earnings for the week exceed 30 times the federal minimum hourly wage (currently $7.25/hour).

Tennessee law also allows you to protect an additional $2.50 per week for each dependent child you support that also lives in Tennessee. In order to protect the additional $2.50, you must provide your employer with information about your dependent children.

“Disposable earnings” are those wages left after your employer has made deductions required by law.


Since BossGman2 has no dependents, a creditor can collect up to 25% of his after-tax pay. This is essentially the same as the Federal cap on wage garnishment for collecting a debt and Tennessee is not a deadbeat haven, so skipping out on his debts may not be that good as negotiating tactic since creditors can easily take him to court and secure a wage garnishment order.

The one advantage I see BossGman2 having in his efforts to dodge or short-change his creditors is his impending retirement. Social Security payments are not garnishable. That means that once he's retired, a wage garnishment order would be pointless to pursue and he can use that to stimy collection efforts. On the other hand, once he's retired he won't have the income (and probably not the asset) to negotiate a payoff either...

- Joel

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 307583 of 308881
Subject: Re: Credit Card Debt Date: 12/19/2013 12:56 AM
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The one advantage I see BossGman2 having in his efforts to dodge or short-change his creditors is his impending retirement. Social Security payments are not garnishable.

in theory they are also protected once in an account, but that protection is mostly ignored. Accounts containing only Social Security payments are routinely seized.

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