Questions about collections and property

[DaisysMom]

I am about 25 K in old debt from 2008 (CC's and a revolving loan with City
Financial) and the collection agencies are howling at my door. I haven't made any payments since 2008. My only income is from part-time SELF-employment and my husbands Long Term Disability from an on the job injury. He will never work again (had to have his spine rebuilt). I have a home with a 25K mortgage that is appraised at 40K. The equity in the home is way below the exemption amount in Ohio. I have nothing else of any value. We are well below the income level for filing BK in Ohio,$4,410 a mo., but the cost of BK here is more than we can come up with at this time. We are barely getting by paying utilities, insurances, food, etc. What are our options? Are we judgement proof? If we were sued, could they force us to sell our home or put a lein on the little equity we have, or is it protected by being within the exemption amount? Can they come after what little income I get from my self-employment? Help....

Any info or suggestions would be very helpful. Thank you

DM

[catleg]

Consider getting the book from Nolo Press and file pro se (without a lawyer).
You can download a trial copy of the "Best Case" software that all the law offices use to prepare the forms.
You can prepare a case the same as they would.
However you won't be able to press a button and print, you'll have to do it manually (it prints the forms with a big "SAMPLE" watermark or something).

[GoingDown]

Yes, you can file bankruptcy pro se, and it will be a lot cheaper than using a lawyer. It sounds like your case is fairly simple and should go through easily. The Nolo book will walk you through it step by step, and it is a lot cheaper than hiring an attorney.

As for being judgment proof, it sounds like you are pretty much judgment proof with the exception of your real estate. Depending on how much equity you have in the house, and the exemptions for your state, a judgment lien might attach to your real estate. In most cases, they would not be able to sell your home out from under you, but if you ever wanted to sell it or refinance it, the judgment would have to be paid off. If your house is already underwater then it really doesn't matter at this point.

It sounds like you have some equity at this point. The way a judgment lien works is as you continue to pay down your mortgage, more and more of your equity will be exposed to the lien, and the lien will attach to it automatically.

Your husband's salary is exempt from garnishment, but make sure your name is not on that account, and don't deposit any of your money into that account. Read the EXEMPT FUNDS stickie above for more info.

Self-employment income is very difficult for judgment creditors to get at. The main thing to do is not tell them anything about it. The less they know about it, the better. If you have customers who pay you with checks, go the their bank and stand in line and cash them rather than depositing them into a checking account. Anything you put into a checking account will not be safe once they get a judgment.

[DaisysMom]

The homestead exemption is about 20K but we only have 15 K in equity so I think that would protect our home. Unless they could put a lein on it and then wait until we paid our mortgage down to below the exemption amount. But at least this gives us more time to decide how we want to proceed. It's already been three years and no one has sued or even threatened to sue us yet. And also two years ago we were almost forclosed on until I successfully got a loan modification. With them seeing that on our credit report, maybe they know it would cost them more to try and sue us than it's worth.

Honestly, it doesn't matter much to me whether I have to go BK or just ride this out. I have completely gone from living on credit to paying in cash as I go and I love it. Feels like I just jumped off the hamster wheel and NEVER getting back on!!! I can breath again.

Thank You all for the information you gave me. I was just exploring my options.

DM

[GoingDown]

Oh, I misunderstood.

I thought one of them was suing you already.

In that case, you don't have to worry about it until someone actually sues you.

At three years out, without anyone suing you, it is unlikely that anyone will actually sue you. Some states even have a 3 year statute of limitations for credit card debts.

Beware of collection triggers. They are what seems to get most collection agencies to start coming after old dormant debts. The main collection triggers are: applying for new credit (credit cards, car loans, refinancing a mortgage, etc.), applying for a job which checks your credit, applying for an apartment which checks your credit, applying for a new checking account which checks your credit, and forwarding your mail to a new address by the U.S. Postal Service.

It seems like you have the right idea about getting off the hamster wheel of credit, and you won't have to worry about necessarily waking up these dormant creditors.

[catleg]

Seriously, take care of it now, at least start educating yourself about the process, don't wait until you have a lawsuit filed and you are forced to act.
The debts will never go away until you BK on them.

[GoingDown]

Educate yourself about the process, yes, and get ready to file bk if necessary at some point in the future if they do actually sue you. And of course, learn about what it takes to brace for impact from a lawsuit, and what it takes to be truly judgment proof, such that if they do get a judgment against you, there will be nothing they can take from you.

But here I am, in some cases 7 years out from the time of my very first charged off credit card, and this particular creditor sold it off to a junk debt buyer, who never filed a lawsuit against me, and it is too late now for them to win a judgment against me. I would be able to defend against any lawsuit from them by using even the new 6 year statute of limitations in Arizona as an affirmative defense.

And over the next year, one by one, all of my many remaining charged off credit card debts will drop like flies, first by falling beyond the statute of limitations, and then soon after by falling off my credit report entirely.

I won't say it has been easy living the judgment proof lifestyle all these years, but I can see the light at the end of the tunnel again.

And I didn't pay anyone a penny!

I didn't even spend a cent on filing bankruptcy or paying a bankruptcy attorney anything, because I never bothered to even file bankruptcy.

I followed the path of least resistance and did the cheapest thing possible-- nothing.

It won't work for everyone, and most people who have something to lose should probably go ahead and file bankruptcy as soon as possible.

This is my list of preferences in terms of what to do if you owe debts you cannot pay:

1. If you are truly judgment proof: Play chicken with them!

2. If you are not judgment proof or if you don't want to wait them out for a number of years living the judgment proof lifestyle, then file bankruptcy as soon as possible.

3. If you have a lot of money and assets that might be lost in bankruptcy, and you can afford to pay a lot of taxes to the IRS, then settle with them out of court, but get it all in writing before you pay them anything.