Question Do I just not pay credit card bills or file chapter 7

[notsowell]

Due to our economy my work has virtually ceased. I am self employed and barely make enough to keep my utilities on. I live in one of the lowest unemployment counties in the nation so finding a job right now is impossible. I have about 7500 in credit card debt with one card. I was managing to make my minimum monthly payment (I had a fixed 1.9% rate) until I paid one day late. Now I've been hammered with late fees and they upped my rate as high as they could go. I've asked for a review of my account, I've never been late in 5 years. With this new payment amount, there is no way I can pay it. My home is paid for and in me and my spouses names. The debt is in my name only. Should I just stop paying or file a chapter 7? I could care less about my credit rating. Could they take our house? Any info is appreciated.

[OhioFiler]

I'd certainly stop paying that credit card if you can't afford to pay any longer. You didn't provide enough information to give you clear answers on what to do but on the surface you don't appear to be a good candidate for bankruptcy.

[notsowell]

Thanks for your reply. Years ago I was in mobile home roofing and doing well. Then a few years ago things started to slow down, seeing as how most factory workers who lived in mobile homes lost their jobs, my business slowed. For the last 2 years I've done odd jobs.
What will they do other than harrassing phone calls? Can they make us sell our house since it's paid for? I have no assets. Will they keep adding late fees and astronomical interest for life or will they eventually close the account?

[fireworks]

Bankruptcy laws and exemptions vary widely from state to state. A paid-for house is a significant asset - depending on the state, it may or may not be seized in a bankruptcy filing.

I don't see any good reason to file bankruptcy over a $7500 credit card debt. My advice (and I am DEFINITELY not a lawyer) is to stop paying the card and start saving up some cash. After a few months of not paying, they'll start to send you settlement offers. Citibank offered to settle my debt for 40% of the total owed after a few months of nonpayment. If you wait long enough you can probably settle the card debt for less than what the lawyer's fees would have been.

[eddiep]

I agree with fireworks, I wouldn't rush into bk over $7500 - $75000 is a different story. It will cost you about $1500 to file for bk. If you cant pay it then stop paying now and like fireworks said, see if they offer to settle but prepared for a 1099 on any amount that they "forgive". In the mean time do some research to see what exemptions you are entitled to in your state, if your house is paid off you may have a hard time protecting it in bk or out.

[tinfoilhat]

Wow, $7500? I'll trade you debts
Seriously I have three or four $7500 debts now (plus the others).

I stopped paying about 19 months ago and cut all communication, I mean I got a different phone number and walked the collection letter from the mailbox to the trash can.

Now I'm filing bk and I see all those $7500 debts have gone up a few thousand (because I had to call all of my creditors)

Now that I called I'm getting settlement offers in the mail. Most are a few thousand less than the $7500 I owed 19 months ago.

So if I was in your situation (having one card) and started work again I could just continue paying at a lower rate on a lower balance.

So thats my advice, stop paying 100% as in don't answer the phone and get suckered into paying $500 this month so your balance will be $1000 higher next month. Stop paying, stop talking, stop worrying.

When you get the money give them a call. Hopefully the account won't be owned by a CA in Atlanta

[notsowell]

Thanks for all the advice. Sounds like I should just stop paying (I can't anyway) and endure the phone calls/letters. Would harassment and a bad credit rating be the worst they would do? I did some research for my state (NC) and it looks like that if a home is in both spouses names and there is no joint debt, then it would be protected. Does anyone know if this is right?

[kornellred]

$7500 in unsecured debt is peanuts. A big enough debt to be a thorn in your side but not nearly big enough to start thinking about bankruptcy.
If you stop paying the monthly payment, your interest rate will go up, late fees will be added, and soon your $7500 debt will become much larger. The bank will sell your debt to a collection agency, and they will eventually sue you and obtain a money judgment. Your wages will be garnished and your bank account balances seized.

At that point, you are ready for bankruptcy. The automatic stay will stop any judgments or collection efforts.

You do not get to choose whether you file Chapter 7 or Chapter 13. If you can afford a Chapter 13, that's where you will be. To paraphrase Bill Clinton: "It's the math, stupid!."

When you get to the Fed's doorstep, make sure you have not transferred or hidden any assets - which includes a shoebox full of 20 dollar bills in your hope chest. That's fraud. It's a felony. (It's probably done all the time - no, I did not hide any assets in either of my 2 bankruptcies) The burden of proof in criminal cases always rests with the prosecutor, so make sure you don't leave a paper trail, 'cause they will getcha.

All in all, indebtedness and what to do about it is unpleasant. You have plenty of company, that's for sure. Good luck.

[notsowell]

Well, considering my bank account balance is under $2 and I'm self employeed with little to no work right now, it doesn't sound to awfully bad in respect to what they will do to me. Who knows, maybe things will look up and I can save up enough for a settlement offer...maybe I'll win the lottery...oh yeah, forgot, I can't afford a ticket. Thanks for all the advice here. I'm glad to know I'm not alone. Guess I should be grateful that it's only $7500 and not more.

[jribe]

Thanks for your reply. Years ago I was in mobile home roofing and doing well. Then a few years ago things started to slow down, seeing as how most factory workers who lived in mobile homes lost their jobs, my business slowed. For the last 2 years I've done odd jobs.
What will they do other than harrassing phone calls? Can they make us sell our house since it's paid for? I have no assets. Will they keep adding late fees and astronomical interest for life or will they eventually close the account?

the paid off house is an asset. They may be able to put a lien on it. You don't say if your spouse works.. They can garnish wages, get a judgement, garnish bank accounts etc.

[notsowell]

Spouse's work has been cut to part-time with minimal income. I just want to be sure that they couldn't make us sell our home over this $7500 debt.

[lrprn]

Spouse's work has been cut to part-time with minimal income. I just want to be sure that they couldn't make us sell our home over this $7500 debt.

If you don't file bankruptcy, then it's far more likely that the creditor would put a lien on the home so that when you do eventually sell the home, the creditor would get paid then.

If either of you is working (even part time), then the creditor would most likely decide to go to court to garnish your wages to get the money more quickly.

[notsowell]

How do they garnish self-employeed wages? I'm usually paid by the job, 95% of the time in cash. My spouse is self employeed also. Could they go after her wages for debt only in my name?

[OhioFiler]

How do they garnish self-employeed wages? I'm usually paid by the job, 95% of the time in cash. My spouse is self employeed also. Could they go after her wages for debt only in my name?

They could garnish your bank accounts.

[frogger]

Looks like the worst they could do is to place a lien on your house. If you're not planning on selling anytime soon, then all they have is a lien that they're not going to collect on. Perhaps in the future, you will be in better financial shape and can pay the lien off.