Need advice having debt nightmares and being sued.

[ResembleMe]

I will try to keep this as short as possible. I really need some sound advice because I am literally waking up in the middle of the night because I am so worried about this.

First a little back story:
My name is Tasha, I'm 22 years old, I work as a CNA (10 dollars per hour), I don't have any children, I did not graduate from college ( will explain further ), I live on a very tight budget and off of the bare minimum ( no car, no cable, no internet i'm at the library), my private loans are currently in collections and pending a lawsuit, and my federal student loans are in hardship deferment status which ends jan 1st.

I went to a public university in Texas for 3 years and funded my education with 24,000 dollars in private loans from chase ( didn't need a cosigner at the time imagine that), and 15,500 in federal loans (no pell grant because my parents are on the lower end of middle class). In 2009 when I tried to get another loan from chase for my senior year I was refused due to being "high risk" and wasn't awarded enough in federal financial aid so I couldn't afford college so I dropped out and now I work as a CNA which barely provides me with enough to live.

My budget goes as 1600 before taxes 1329 after taxes 1329 -700 (rent and utilities)=629-120 ( food)=509-88(transportation)=421-250(health insurance high due to pre exsisting conditions ) =171-100(phone and house supplies)=71 ( left over and I am not joking)

Now the collection agency chase hired wants my wages garnished at 25% of my income after taxes which is the most they can in my state which is 332.25 and the federal goverments income based repayment plan thinks I should be able to pay 206 back a month which as you can see theres no way I can pay them back without forfeiting eating or a place to live. I don't have any one I can go live or borrow the money to pay them back unfortunately so I am at a loss. I know it's nearly impossible to file for chapter 7 bankruptcy with undue hardship but what are my other options. I didn't graduate from college and i am in a beyond low paying career I mean where I live 14 dollars an hour is the max they pay for what I do and you have to be working there for years.

So who has any advice?

[moe]

My advice is to declare bankruptcy, get free of debt and avoid acquiring any debt in the future...but honestly but I am not an expert here.

You are so young and I regret not getting free of my debt when I was young. I acquired it and had this feeling like I should pay it off but it really was impossible. I've paid it off many times over at this point but the interest will haunt me for the rest of my life at this point. That's the basis of my advice. Get out of debt when you are young.

[PushRestart]

I am much in favor of bankruptcy, am doing so myself right now, with a big focus on not getting more in debt again, no matter what. I would highly recommend that you get in front of a BK lawyer who offers a free consultation ASAP to see if you could be helped by bankruptcy.

As a side note, I have a family member who does CNA work in the Greater Seattle area and makes at $16-18 per hour working for a service. She gets 35-40 hours per week, not a bad deal up here.

[daxtell]

i understand where you are right now. it is scary. but you will get through it with good planning and perserverance. from the looks of your budget at first glance my first thought is that you could probably pay less for your housing expense with a little research. i am not sure where you live but the market rent for 1 bedrooms in my area start at $500 and up. plus you could also research room mate situations (renting 1 room in a house). the only other thing i can think of is perhaps try and land another part time job to add income to the budget.

i wish you luck and keep thinking positive thoughts.

[KeithDoxen]

Has anyone actually filed a lawsuit yet? Or is the collection agency simply "threatening" to sue you? Collection agencies do this all the time, even the ones that have no attorney on staff and have no plans to sue you. They know that many debtors are easily frightened. Incidentally, how long ago did you default on the loan?

Your student loans are non-dischargeable via bankruptcy, absent a demonstration of undue hardship, which is very hard to prove. However, you may want to consider filing a Chapter 13, which will push your student loans into your payment plan. The balance will still be there when your 13 is completed, but that would be one way of making sure that you won't have to live on the street because of a wage garnishment.

Have you considered moving back to Texas? There is no wage garnishment in Texas for most debts, including private student loans. Federal student loans can garnish anywhere, but you sound like you're on top of those with the income based repayment. If you lived in Texas and were sued in Texas, Texas collection laws would apply.

Again, a lot of this depends on whether a lawsuit is really coming. I am curious how long ago you defaulted, what the name of the collection agency is, and whether you have been contacted by a lawyer or served with papers yet.

[ResembleMe]

Has anyone actually filed a lawsuit yet? Or is the collection agency simply "threatening" to sue you? Collection agencies do this all the time, even the ones that have no attorney on staff and have no plans to sue you. They know that many debtors are easily frightened. Incidentally, how long ago did you default on the loan?

Your student loans are non-dischargeable via bankruptcy, absent a demonstration of undue hardship, which is very hard to prove. However, you may want to consider filing a Chapter 13, which will push your student loans into your payment plan. The balance will still be there when your 13 is completed, but that would be one way of making sure that you won't have to live on the street because of a wage garnishment.

Have you considered moving back to Texas? There is no wage garnishment in Texas for most debts, including private student loans. Federal student loans can garnish anywhere, but you sound like you're on top of those with the income based repayment. If you lived in Texas and were sued in Texas, Texas collection laws would apply.

Again, a lot of this depends on whether a lawsuit is really coming. I am curious how long ago you defaulted, what the name of the collection agency is, and whether you have been contacted by a lawyer or served with papers yet.

Hello, sorry for getting back to you so late. Anyway I was served with a summons for a civil suit from ARM a collections agency out of NJ for my chase student loans that have been in collections for 2 years. I tried to pay chase but they wouldn't lower my payment plan to fit my even tighter budget back then. So yeah Accounts Receivable Management wants to meet me in civil court here in portland to i'm assuming garnish my wages. My federal loans are alright because they are in deferment it's just these private loans in collections that are the issue.

[ResembleMe]

[QUOTE=daxtell;534479]i understand where you are right now. it is scary. but you will get through it with good planning and perserverance. from the looks of your budget at first glance my first thought is that you could probably pay less for your housing expense with a little research. i am not sure where you live but the market rent for 1 bedrooms in my area start at $500 and up. plus you could also research room mate situations (renting 1 room in a house). the only other thing i can think of is perhaps try and land another part time job to add income to the budget.

I know my living situation is too expensive , I currently live in a room mate situation in downtown portland because it's near my job and when I get off of work public transportation is not running and I don't have a car. I pay about 500 for rent and 200 for utilities. Am certainly looking for a part time job that would make enough maybe just to pay my debt payments.

[KeithDoxen]

Anyway I was served with a summons for a civil suit from ARM a collections agency out of NJ for my chase student loans that have been in collections for 2 years.

I just googled ARM Solutions, the collection agency that contacted you. Apparently they have a reputation for making false threats all the time, such as telling debtors that they are about to sue, and that the process server is on his way with the summons. Of course no one ever shows up. ARM doesn't appear to be a law firm of any sort and I'm wondering whether you really did get served with legal papers, or if you just got a scary looking paper that was composed by ARM to make you think you're being sued. What exactly does the summons say? If you want, scan it in and send it to me via private message.

[MSbklawyer]

A chapter 13 could allow you to hold the student loan creditors at bay for up to 5 years. The loans would pass through bankruptcy, but you could potentially make very, very small payments over that 5-year period.

[treehugger1]

Well, what MSbklawyer says is true. Unless, you exit a BK 13 owing significantly more on your SL's due to the accrued interest. I know several folks who went the BK 13 route only to find that when they exited the plan after 3-5 years (some were pre-2005) their outstanding debt had really not changed. It was now with one creditor (Sallie mae, AES, etc.) On the other hand, i have spoken with attorneys who claim that many high-owing student loan clients are in a perpetual BK 13. I understand this becuase I am under a permanent 15% SL garnishment. Still cheaper than a 13 payment plan.

If these are truly loans for education, private or otherwise, it seems to me that garnishment is limited to 15% of disposable income. My loans were all federal, but I don't think this makes a difference in the maximum of 15%. You might want to consult a legal advisor or CPA who understands private student loan debt.

[MSbklawyer]

I have several clients like this, that are probably going to be in Chapter 13 the rest of their lives because of student loans. Some of them have 6 figures of student loans and are working at very low-paying jobs. Rather than have their meager wages garnished, they can file a 5-year Chapter 13 that lets them make payments of $75 - $100 a month or so that pays their attorney fees and maybe 1% or less toward their unsecured student loans.

They are no better off after the discharge to be sure -- the loans are still there, and indeed the interest has continued to accumulate, but they've held the collectors at bay for 5 years and have been able to get on with their lives without their wages being garnished.

[KeithDoxen]

If these are truly loans for education, private or otherwise, it seems to me that garnishment is limited to 15% of disposable income. My loans were all federal, but I don't think this makes a difference in the maximum of 15%. You might want to consult a legal advisor or CPA who understands private student loan debt.

The 15 percent number only applies to federal student loans. That's the amount of income set by federal statute that the lender can garnish, even without a judgment, to recover defaulted federal student loans. Private student loans fall under the same garnishment laws as any other debt though, and those garnishment laws, including the percentage of income that can be garnished, are determined by each individual state.

[MSbklawyer]

The 15 percent number only applies to federal student loans. That's the amount of income set by federal statute that the lender can garnish, even without a judgment, to recover defaulted federal student loans. Private student loans fall under the same garnishment laws as any other debt though, and those garnishment laws, including the percentage of income that can be garnished, are determined by each individual state.

Moreover, the 15% garnishment limit is for the administrative garnishment procedure, i.e. where they garnish the borrower's wages without having filed suit or obtained judgment. If they do it the old fashioned way and file suit against the borrower and take judgment, they are limited by the FDCPA's 25% ceiling.

[treehugger1]

Again, the "private" student loans can rear their ugly heads. To clarify, I spoke to a DOE student loan advocate this morning, and he verified that "my" government-backed SL's could never be under garnishment in an amount above the 15% administrative threshold; judgment or not. The above 15% garnishment can come into play for private loan default that leads to lawsuit and judgment. This has to be really screwed up for all those medical residents and new attorneys who owe big bucks on private student loans.

MSbklawyer - A local attorney has told me that there are many local medical and professional folks in my area who choose to live in a nearly perpetual BK 13 due to enormous student loans. The attorney even told me he has a special BK 13 plan all worked out in a spreadsheet. LOL

I am learning that there are many bankruptcy attorneys/CPA's who seem to specialize in bankruptcies involving student loans. And, I have also recently learned that 15% garnishment of wages implies "wages" and not "income." Very interesting. I'll bet things can get confusing for trustees, especially when there is such lack of consistency from state-to-state and region-to-region.

[KeithDoxen]

A local attorney has told me that there are many local medical and professional folks in my area who choose to live in a nearly perpetual BK 13 due to enormous student loans. The attorney even told me he has a special BK 13 plan all worked out in a spreadsheet. LOL

LOL. That's quite interesting. I wonder how living in a Ch 13 perpetually would impact one's ability to carry on a semi-normal life.

Also, any pointers on how to find these attorneys who specialize in student loans? I have some questions that I'd like to address to someone who has dealt with actual cases involving student loans.