As of late, I have had some bad financial issues. Not overly bad, but enough to having me worried, losing sleep, depression, ect. I am physi...

Question

As of late, I have had some bad financial issues. Not overly bad, but enough to having me worried, losing sleep, depression, ect. I am physically disabled, I have undergone 11 reconstructive knee procedures that has left me physically disabled the rest of my life at only the age of 27. I do have some credit card debt and do have a few questions/concerns:

Discover Card: $1,100 (charged off, but not sent to any collections).

Amazon/SYNCB: $2,200 (charged off, sent to collections. Although right before Christmas, I sent a debt validation letter certified, never got anything back).

CACH LCC: $950.00 (Sold from OC)

And a medical bill of $600.00 that I am applying for a waiver for.

Due to my disability, I live at home with my parents. My only income is Social Security in the amount of $790.00/month. So I am living month to month, at the end of the month I am lucky to have $20.00 in my checking. I do have a paid off truck that is 11 years old.

I have not paid on any accounts in 2 1/2 years. My state I live in is Pennsylvania. I am considering filling chapter 7 bankruptcy, is it worth filing that over the amount of debt I have? I can not afford a lawyer anyway. I am afraid of getting sued and having my truck taken away. I use that to get back and forth from my Orthopedic Appointments and Physical Therapy. That is all I have to my name.

Any advice would be greatly appreciated.

Answer

I would be pleased to consult with you about these debts via email.

Whether you should file bankruptcy is up to you. Some of your debts are with junk debt buyers so that means they are seriously delinquent. In such case, your credit has already been harmed. You can file bankruptcy at any time; you do not need to rush out immediately and file.

Your income is exempt as long as you keep it in a bank account just in your name. You can never have assets in your name, at least until the statute of limitations expires; longer if there are judgments against you.

For these reasons, I would not file bankruptcy - I don't know what the going rate is in PA but it is about $2000 down here. This includes filing fees, attorney fees and any miscellaneous fees. While some of the fees can be waived, given the amount of debt you have it does not seem justified. My ballpark unscientific rule of thumb is that a client should have at least $10,000 in dischargeable debt before they file bankruptcy. You can have less but it should be enough to make it worthwhile.

Now let's look at your debts.

Discover: never sells the debt to a junk debt buyer. They can and will sue. They have a nasty law firm in PA. If you can get the funds before the debt goes to nasty law firm Discover will settle for between 30% and 40%. Given your circumstances, 30% is a possibility.

Amazon/Synchrony - Synchrony used to be GE. They do not usually sue (I have never seen them sue any of my PA clients) and sell to a junk debt buyer. Depends on who they sell to but these debts can be settled once they are with a junk debt buyer. Percentages may vary; my ballpark range is somewhere between 20% - 40% for pre-litigation accounts and 50% - 80% after litigation. These are just general estimates, but anything within this range is fair.

CACH - will sue but the amount is so small, its doubtful. CACH will settle.

Medical bill - probably will not sue you and its so small I would not worry about it.

Statute of limitations in PA is 4 years running from the date of your last payment of any kind. If 2 1/2 years have gone by, if any lawsuits are going to come, they will come in the next year. After that you will be just about home free.

There is no exemption in PA for motor vehicles so your truck is at risk of seizure if a creditor gets a judgment but what's it worth? An 11 year old vehicle cannot be worth very much. There are costs for a sheriff to sell a vehicle. These sales are not really advertised. So if a creditor is not going to walk away with anything then they may not even bother.

What I would do is, despite your meager means, is start saving what you can. When you have about 30% of the Discover debt saved, then I would try to resolve that first. Then you build up funds again and try and do the Synchrony debt if the statute of limitations has not expired. Once the statute runs, forget about it. There is no virtue in paying unless you are applying for a mortgage. Paying after the statute has run will not improve your credit any.

Under no circumstances should you make any kind of payment arrangements on your debt because it resets the statute of limitations. I have several articles about debts on my website at www.rachelhunterlaw.com. The only time when I would even consider it is after a judgment has been entered and a creditor is trying to execute. However, if you do as I say and get the Discover debt settled as soon as you can, then you may not have to worry too much. However, only make a payment arrangement after you have talked to a lawyer.

I charge reasonable rates to resolve debts. If you need more help, email me at [email protected]/* */

Answer

I'm going to respond in a similar fashion to Attorney Hunter. As far as bankruptcy goes, I must say that I am not a bankruptcy attorney. Having said that, you list less than $5000 in debt here. I would surmise that you are not a bankruptcy candidate for such a small amount.

Discover will sue you. They will either hire WWR or Pressler and Pressler to sue you. Both of those firms are very reasonable to work with.

Sync, the old GE bank, may sue you or may sell the debt. We see it as a 50/50 proposition, meaning they sell half of the time and they sue half of the time.

CACH will sue you, they are a junk debt buyer, even for such a small amount.

Having said all of that, you have referenced that you have no money whatsoever. To be frank, its really impossible to offer any advice under that situation. You need money to either settle, or defend.

The one thing that I will advise you to do is to save all collection letters that you receive on any of these accounts. Save the envelopes that they come in, too. Have a consumer attorney, whether its myself or another, review those letters and envelopes for FDCPA violations (violations of debt collection laws). That can change the game for you very quickly, if one of these collectors violates the law.