Debt and What to Do...

Updated on May 13, 2010
R.C. asks from Canoga Park, CA
13 answers

I recently received a letter from a company stating that I owed them money, and were preparing to take me to court unless I paid the balance in full. This debt was from a few years ago, and this prompted me to check my credit report, as I had no idea that debt was out there. Honestly. It turns out I have almost $21,000 in old debt, ranging from a few years ago to 7 years ago. I have paid alot in debt that I had owed, and when I stopped receiving notices and bills, I assumed that it was all paid. Well, I was also 20 by the time I realized this and apparently I was wrong and naive. My question is that the debt is not credit card, but other various things and I am on a very limited income. I need to learn to budget better, that's a given, but I was told that a Chapter 7 bankruptcy was basically my only option. I am aware of people trying to scam me for all I'm worth, so I was wondering if anyone out there has been in a similar/same situation and has any advice for non-credit card debt and budgeting??

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answers from Los Angeles on

Riley's response is great. I work for a lender. The debts will appear on your credit report for 7 years from the most recent date of last activity (last payment, etc). As she said if the debts are old it will probably work against your credit if you start paying on them now. Even if you pay in full, now you would have an account that has a 2009 activity date vs an account that has a 2006 or 2005 date. Your credit score will actually go down due to the more recent dates. Anything over 1 year old will just re-set the clock and then instead of having old collection accounts you will have newer collection accounts (even if they are paid). The letter you received threatening to take you to court is one way creditors can get the dates re-set. You mentioned $21k in debt. If the company that sent you the letter is owed a majority of that $21k they may take the time and expense to file a judgement against you. However most collection agencies are not going to go through the time and expense of filing a judgement. I would be really careful about filing a BK just due to some old collection accounts. You probably should talk to an attorney.

I think the items you can request from the collections company are:

1. copies of any papers that show I agreed to pay what you say I owe;

2. Full payment history

3. Explain and show me how you calculated what you say I owe;

4. Prove the Statute of Limitations has not expired on this alleged debt.

Regarding number 4, I have heard (can't say for sure, but...) that after 3 or 4 years the collection agencies can't keep contacting you regarding the debts, so you may just be getting close to that cut off time and they are making one last attempt to see if they can get $$$ from you. You must make the request in writing and the agency has 90 days to respond.

Going forward, I would make sure that all your current bills are paid on time. Check with your bank or credit union to see if they have someone that could work with you on a budget.

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answers from San Diego on

I would speak with an attorney.

But do NOT pay any of it until you do.

Something I learned from our Lender, when we were buying our house, was that

a) debts stay on your credit report for 7 years (yup knew that)


b) You pay them. They then stay on your report for ANOTHER 7 years from the date of payment.


c) It's actually better sometimes NOT to pay off old debts. Especially if you're within a year or two of having them drop off the radar.


D) The person/agency has to LEGALLY furnish you with 3 documents. I don't remember all three. One has to do with how much they bought the debt for/the original debt. I honestly don't remember the others. I'll look in my old mail, but don't hold your breath. If they CANNOT furnish you these three documents, you get to send them a happy little letter telling them that they are legally require to DELETE the debt from all credit reporting agencies. They have a very limited time in which to do this. Something like 90 days or 180 days.

At that point, once you have the letters of the ones who can furnish them, you negotiate. 10 cents to 30 cents on the dollar is fairly common.


Ch.7 MAY be an option. So may Ch.13. It is hands down better to file chapter 13 then to consolidate. In a nutshell, Ch.13 is consolidating with legal protection for YOU. There's a formula that determines how much you should be able to pay AFTER taking out money for rent/mort/food/bills/childcare/car maintenance/etc/even entertainment. Once that is figured out they multiply the payments times 5 years and that is what you have to pay back. Same as consolidating, right? (Well, except that in CH13 you can still send your child to preschool and catch the occasional movie...which isn't factored into debt consolidation). Here's the kicker. If you lose your job, the payments stop, until you have a new one. If you or a loved one gest sick and have to go on FMLA...payments stop...until you're back at work collecting a paycheck again. If you have to take a lower paying job, the payments DECREASE. Now if your income doubles, the payments increase...but with debt consolidation if ANYTHING negative happens to your income, you're screwed. You get bumped immediately out of it, and you still owe the whole thing.

With Ch13, you DO have legal fees. But guess what? They get added to the payment plan that you'll be on.

Anyhow, lots and lots and lots of info. So you can see why I'm pointing you in the direction of a lawyer. A good place to find one is to look up organizations you respect, and then go to their donor list. You'll find lawyers & firms there. Guarenteed. Email 5-10 or so.

Good Luck

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answers from Los Angeles on

Hi - sounds like a tricky situation. I am an attorney and have a little experience with this. You might try negotiating with your creditors. Creditors are a little more inclined to negotiate with you, more so than collection agencies. My advice is to look over all of your finances, calculate how much you can reasonably afford to pay off every month, then contact your creditors and tell them this. Tell them you'd like to start right away. You may make some leeway with some of them. But bear in mind that this dollar amount has to be that which you can tolerate, as you cannot afford to be late on your payments. You may also considering hiring someone to negotiate with your creditors too - they can be quite helpful. Best of luck to you.

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answers from Los Angeles on

I use an excel sheet on my computer to keep track of all the credit cards. I can email you a sample if you would like to see it, but basically this is the info I would put on it.
credit card name, total credit line, available credit, percentage, due date, and minimum balance. Then I would total the minimum balance column. This would tell me at a glance all the important info. Each month I would update it because the due dates change by a day or two, as do the minimum balance, and sometimes the interest % changes too. It forced me to look at each bill each month. I showed this to a friend of mine who had just noticed that her 6% "introductory" rate had expired and she was now paying 21%. She hadnt caught it because she had forgotten and had it in her mind that she was only paying 6%. It cost her a lot of money.
This will also help you see on one page which bills to concentrate on paying off first with any extra money you have. They always say to pay off the card with the highest interest rate first. Sometimes it's good to pay off a card with a low balance first because then you will have less bills coming in each month.
Also, this will help you see if you can consolidate any bills together. I had credit cards that would offer me a lower rate if I transfered another bill to it. this would get rid of the balance on one or two cards. Read the fine print....Credit card companies often say there is a special rate for purchases, others for balance transfers. Make sure you use the right on for the right action.
I hope this helps, and let me know if you would like to see my chart.

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answers from Los Angeles on


Have you tried calling the creditors to negotiate some sort of repayment plan? Ask them to settle for a lesser amount too. I'm sure that they would rather have $ 10.00 a month than nothing. Maybe you can look into a credit councelor? But do research them to make sure that they are legit. I've also heard that you should beware of any organization like that who asks for large sums of money up front. But first, I would try to speak with them directly and see if they would settle your debt for less and make sure that you get the "deal" in writing BEFORE you give them ANY money!!!

Hope that helps!


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answers from San Diego on

Instead of bankruptcy have you thought about contacting the recent debt and trying to work out a settlement. also if it was over 7 years ago don't worry abouit it bc they can't get money from you any more. A lot of times yoy can settle for alot less than you owe. I hade one bill I faulted on and it was almost 6,000 dollars and settled for 500 dollars. just call them and see what they are willing to deal. and remeber to get everything in writing. especially the account that wants to take you to court. make sure you log every phone call yourself and ask for original bills.

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answers from Los Angeles on

Your credit rating is seriously in trouble if you have that kind of debt. Does your fiancee know about this? If you get married, your credit will affect him so tell him NOW.

It sounds like you were delinquent in payments, it was sent to collections, then probably to a company to try to recollect the debt -- all of which were ignored by you. If you can't make some arrangement to reduce or pay off your debt, it sounds like filing for bankruptcy is your only option. HOWEVER, that is a very serious choice. It affects you for YEARS. If you try to get a loan for anything, you will be denied. If you try to get additional credit cards, forget it. If you try to rent an apartment, etc., your bankruptcy filing will come into play. I have never filed bankruptcy but I know it will screw you over time and time again.

Filing for bankruptcy should be your absolute last resort. With your young daughter and fiancee, you don't want to drag them down with you with this decision.

Find a financial advisor who can help you make some sort of arrangement to pay down this debt. And know now that you can't just ignore the delinquencies and collectino notices.

Most importantly, learn to live within your means so this doesn't happen again. Good luck to you.

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answers from Los Angeles on

Look for a debtors anonymous program in your area. It's a 12 step program and is super helpful. They should be able to answer your questions, and educate you. Good luck.



answers from Los Angeles on

If you want to negotiate a payment for these debts, use the company that we used a few years back. Debtco in San Diego. It took two years to get out of debt, and a year to restore our credit, but our credit is excellent now. They are a very good company.


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answers from San Diego on

As far as I know the bankruptcy will help you get rid of these old debts. However, if these companies already have gone to court and have legal judgements against you, they cannot be taken into the bankruptcy. You would still be obligated to pay them. In that case you should get in touch with them and try to work out a lower amount to repay or a repayment They will refer you to an attorney, and he or she will give you a 30 minute consultation for free. The Bar Association can also probably refer you to legal aid programs available for low income individuals. If you are not in San Diego, I'm sure that any county bar associatiion will have a similar program. Good luck.



answers from Los Angeles on

First, go on your credit report and contest everything. Say you paid it off years ago, and were told is was paid off. Use strong words (I PAID this.) If the creditors don't reply in 30 days, it falls off your credit report and goes away. Also send letters to all of them, at the same time. If they do not respond in the 30 days, it should be null and void, and you can send to the reporting agencies that they made no effort to contact you.
Second, you should have the contact info for the debts after the 30 days. Call them and say, I have this much money. Are you willing to take it for a 'payment in full'? If they do, great! have them send you a letter. If not, hang up and call the next one. Write all your offers to the various places down so you know what you have offered them. collection agencies often buy your debt for pennies on the dollar, so if you owed $500 originally, the collection company paid (generally) $50! So getting $250 is Great for them and looks good on you...
Third, Enjoy your baby!
Good luck



answers from Los Angeles on

Hi R.! Sometimes an extra stream of income can help get yourself out of debt! We have many on our team who have paid off debt and some who have replaced their full time income. You can do it around a very busy schedule! For free info check out
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