Settle Debt, Close My Bank Accounts, or File Bankruptcy?
I had a default judgement entered against me by Capital One in 2009. I never received anything in the mail notifying me of a court date. However, I lived in an apartment complex and frequently received mail for my neighbors by mistake. The last date of activity/contact on the account was December 2003. I lived in Kentucky when the card was issued but moved to Ohio in February 2006. In January 2012, I received a 1099-C from Capital One for $601. I believe the original judgement was for $800. I filled out the form for insolvency when I filed my tax return. I had recently lost a job and was working part-time and collecting partial unemployment benefits.
I am currently working as a server and receive public assistance (food). My paychecks amount to about $60 biweekly so I am not concerned about garnishment. I have 2 checking accounts, one through Higher One and one with USAA. I keep virtually no money in the USAA account, pay mostly with cash and use the Higher One account for anything that requires me to have a recurring payment. I don't keep much money in the Higher One account, just enough to cover bills. I am working on my MBA and my student loan money is disbursed into the Higher One account. I can close the USAA account if necessary, but the Higher One account has to stay open to receive my student loan disbursements. I can opt for a paper check, but would have nowhere to cash it as USAA doesn't have a branch in Ohio.
I generally transfer part of the loan disbursement into my PayPal account and never leave more than $300 in the account. At this point, do you think the will try to freeze my bank accounts? The USAA account was opened in November 2011, the Higher One account in September 2012.
I have also moved to another part of Ohio since the judgement was entered and have been at my current job for less than a year. This job is not listed on any of my credit reports. Should I try to settle this judgement? How do I find out how much it is now? Will me contacting Capital One restart the SOL on the old debt which would have expired in 2010? I do have other debt, less than $10, 000 of which a little more than half is medical. I had thought about filing Chapter 7, but would that include the judgement?
Thank you for any advice you can give me.
Should I settle this judgement, close my bank accounts, file bankruptcy?
—Kelly
Your bank accounts are always at risk of being levied as a result of a judgment debt outstanding. Settling the Capital One account judgment in order to protect your funds deposited in your bank accounts is a good idea. But you brought up bankruptcy too, so you first need to compare the benefits of chapter 7 against settling the judgment, and have a plan for your other debts too.
Bankruptcy vs debt settlement.
You did not say what the current balance owed on the judgment is. Only that it was for 800 back in 2009. Interest is allowed to accumulate on judgment debts, so let’s assume the balance on the debt is rounded 1200.00. At the time you originally defaulted on your CapOne credit card payments in 2003, Capital One was still selling charged off credit cards to debt buyers (they don’t do that much for the last few years). Let’s assume the judgment is actually owned by a debt buyer.
Given you can document and show you are on public assistance lets assume you can settle the debt for half of the current balance owed. Basing that amount on the assumption above this would mean coming up with 600.00 to settle.
Can you come up with eh 600.00?
The cost of filing bankruptcy can range from roughly 1500.00 to 2200.00 depending on the simplicity of the filing, where you live, the attorney you hire etc. Comparing a 600.00 settlement with the cost and knock on impact from filing chapter 7 bankruptcy makes choosing settlement a no-brainer using only a dollar comparison, and only considering the judgment debt that could result in a bank levy.
Yes, filing bankruptcy, if a chapter 7, would eliminate the judgment debt too.
If you want to find out the precise amount owed on the CapOne credit card judgment you can:
- Contact the judgment creditor listed on the original court documents. If the judgment debt was sold to another debt buyer you would be able to learn for the original judgment creditor who they sold it to, or possible see inquiries from the debt owner in your credit report.
- Pull the judgment entered by the court and see what interest rate was allowed and then calculate that interest annually for what looks like 3 years or so.
Settling medical bills in order to avoid bankruptcy.
With your additional 10k of debts, of which half are medical bills, suggest more consideration be given to the benefits from filing chapter 7 bankruptcy.
I will make a couple of general assumptions about your remaining debts and then pose some additional questions for you to answer using the comment box below.
Assume your remaining 10k of debts could be settled for half of the balances owed. You would need to come up with 5k either up front, or over a period of time in order to settle. If taking some time to settle the accounts, you would want to prioritize which ones to work on first in order to avoid a similar situation – being sued and a judgment entered. How much time you have to come up with the additional money will depend on the type of debt, who is collecting, and how long ago payments were made.
Using all my assumptions, you would be able to avoid bankruptcy for about 5600.00, or file bankruptcy for probably less than 2k and wipe out the debts that way. So, now bankruptcy wins the cost and dollar benefit analysis. You would then start to consider other angles of the 2 options. One I would point out first is that chapter 7 bankruptcy is a reset button for your finances that can only be pushed every 8 years. Also, you would never be able to answer the question you see on all the forms we fill out in our life time of – “Have you ever filed for bankruptcy? If so when?” – with a no.
Let’s assume the cost differential between your settling the judgment and all other debts and chapter 7 is 4k. Is that 4k additional expense worth avoiding bankruptcy for you?
More questions:
Who are each of the other debts owed to? What are the balances? When were the last payments made on these other accounts? If debt collectors have contacted you on any of these accounts in the last 6 months, who are they?
I can give some more detailed feedback if you can answer all of my questions in a comment reply below.
Anyone considering whether to file bankruptcy or negotiate and settle debts is welcome to post in the comments below for feedback. You can also reach me for a consult at 800-939-8357 and select option 2.
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
Hi from Dallas, Texas. I have 29k or abouts in credit card debt. I stopped working 4years ago due to declining health and also needing to care for my adult disabled child who lives at home. I stopped paying on all of my credit cards except for PayPal which my husband paid off for me. But we are now financially drained and I just can’t pay the cards. I juggled them for a long time, but eventually all of the rates went sky high. Recently wellsfargo got a judgement against me and drained our joint bank account. But I still owe them more. Now my husband opened his own individual account, so I no longer have a working bank account. I’m considering filing individual chapter 7, as all of the credit cards are in my name. I have no real property or assets. My question is this: My husband put me on the house title but not the mortgage. He bought the house before we got married. Is the house at risk when it’s sold? Also, my husband has a base salary of about 70k. Would his salary disqualify me? Thank you
You can file bankruptcy without your spouse, but your household income will be factored into whether you qualify for chapter 7 or not.
Talk to a local bankruptcy attorney about how this could work for you.
How much is left owing on the Wells Fargo judgment?
When did you stop paying any of the other accounts?
Hi, I have had excellent credit for years. I divorced 4 years ago and was struggling as a single mom of college age kids so I purchased a home with my parent to share living expenses. I left the marriage with $24,000 in debt and have basically paid the minimum payments while spending what I paid each month. About a year ago my dad passed away and I streamline refinanced the house so I there is no equity. I have been taking the $500 a month to cover these minimum payments and I am now out of money. I net about $2200 a month which includes some due to health issues, and after mortgage, car, etc I have only about $ 250 left. I have contacted my creditors and talked to credit counseling both have offered me a payment plan of $475 a month. I know I will not be able to make this payment. I have been trying to take in a roomate or rent a room in my house but haven’t yet. Is bankruptcy my only option? Thank you,
I wanted to add the $500 was from my savings.
If you can file chapter 7 bankruptcy it is likely going to provide the most relief and benefit. If for some reason you learn you cannot do a chapter 7, post an update with a list of your credit cards and balances and lets go from there.
Mine is the same similar situation as all the others. I received a rather generic letter in the mail saying “Plaintiffs motion for substitution of council of record. And a ” Cause No ……Having no clue what this was for I called and asked for more detailed info. I got transferred 4 times because i insisted they prove to me that this is legit. I would not disclose my social or any other info and insisted that they have the burden of proof, all I was prepared to give them was the case # they supplied and it should have all the information they wanted from me. I requested documentation on the details of the alleged collection. They asked again to verify my address. My response was you mailed this to me, you already have it. They agreed to mail the requested malformation but added that there was no guarantee that I would receive it or how long it may take to gather the documents. Even the 4 digits of two phone numbers they had are numbers we never had. I ended with, you have caller id and my number is not blocked. I expect the documents in a timely manner. So like everyone on here, I may need the # of a few attorneys in the Dallas Tx area.
Look up your name in your local court record and see if you have any collection cases open or judgments entered. Let me know what you find.
Debt collectors want unique identifiers to make sure they are talking with the right person. They take that a bit too far, like in your situation where you were responding to the letter they sent.
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Who are the players involved (attorneys prior and now substituting, creditor, debt buyer)?
I recently just got a contracting job about 2 months ago. In 2011 i was sued by a collection company and they won the judgement against me. Now they are trying to collect $7900 and $2000 in addition for interest. I also recently pulled my credit report and notice i have another collection of $3000 with another company. I don’t have much money in my bank account. I live in the bay area making about $2900 a month after tax but cost of living is very high here.
I am not sure if I should settle my debt or file for bankruptcy.
Also, only the $3000 shows up on my credit report. I have pulled all 3 credit reports. Does that mean i do not owe any other companies money? I walked away from my debt 8 years ago so i am not sure who i owe money to. Is credit report the best way to find out what is out in collections?
Most unpaid debts appear on your credit reports up to 7 and one half years. An exception would be a judgment for a debt that is older than 7 years. The date the judgment was entered in the court record starts 7 more years of reporting for a collection account (but the prior one will fall off, where the judgment entry will have its own set of legs).
Who is the debt collector reporting the 3k debt? Is the original creditor for that debt off your credit now?
It sounds like the judgment balance may be the only debt left to really worry about. If that is the case, I generally do not like filing bankruptcy over smaller amounts of debt.
Assume you could settle the now 10k balance for half. You would be filing over a 5k debt. The cost of chapter 7 bankruptcy averages $1,800.00 (that’s for everything). Subtract that from the 5k and you are filing over what could potentially be $3,200.00.
What are your options for raising 5k? How quickly can you do it?
1. $3160 is owe to Lien Enforcement Inc. updated on 03/2014 and was placed for collection on 8/2013. This showed up on my TransUnion report.
2. $10000 judgment won by Persolve
If i settle for half of the total debt above. i should be able to raise the money fairly quickly (within the next 3 months) with some help from family. But to be fair i would like to owe as little money as possible to family members. Would the best option here be settling with both the Lien Enforcement company and the judgement won by Persolve?
If so, how much should i try to settle for percentage wise? Would it be harder to settle for the $10000 since they have a judgement against me and can threaten to garnish wages?
What is the strategy in starting to a settlement with both companies?
Lien Enforcement Inc collects on debts related to vehicle towing and storage. When did you have a situation like this? Let me know any dates on that and I can offer better feedback.
Negotiating and settling judgment debts is a bit different than settling other debts, and the leverage they have, or think they have (and they are generally right), is part of it. Read through that page on the topic (and deeeeep into the comments) until you are prepared to call and negotiate the debt with Persolve LLC.
The strategy with Lien Enforcement Inc will be different depending on your answer to my question.
My situation with Lien Enforcement was around end of 2011. I had parked a project vehicle and it was towed because due to the 72 hr parking rule in CA. I did not get the vehicle back and simply left it with the city. I initially did receive bills from the city but I have not received any collections notice recently from them but only noticed it when i pulled my credit report.
Okay, so when you said you can gather up enough to settle with Lien Enforcement Inc and Persolve LLC, you mean you can pull together roughly 6500?
I would start with Persolve, and also read over all of the tips and suggestions for settling with a collection agency.
You can post questions and concerns along the way. If you need help let me know.
Would you be able to provide someone that can help me settle? I am not experienced on this and is afraid to be taken advantage of by the collection companies.
Yes, just fill in the consult request form and submit it. You can get into all the details on the phone.