I make $13/hr and owe $18,900...

[InT00Deep]

Hello,

Very new here and to the whole process and where I should go from here.

I am just a single individual trying to get by. No wife or kids or other obligations. My living situation recently changed and I was making minimum payments on my credit cards for years. But I can no longer afford to do that. I was never sure how I was going to ever pay them off, but now I see it's just not going to happen any time soon. Most of this is just from using the cards to live beyond my means (going out to eat, bars, entertainment, etc). Making purchases and saying "I'll pay for it later" and never doing so. No fancy toys or anything. I have no assets besides my car which is worth about $1000. Pretty much just use it to commute to work. If it breaks down, I'm screwed.

I am making $13/hr at a full time job but I have $0 in savings. I've been living paycheck to paycheck. My living situation may change again soon. Right now I rent a room at a house but I may have to get an apartment sometime in the near future. Not going to happen when I have no savings, as I need money for first/last months rent and deposit, etc.

I have two credit cards, one of which I just recently missed the payment on. The other one is due in less than a week.

I can't afford an attorney unless I stop paying the cards.

The social security overpayments are from when I was on disability, then got employed but continued to receive checks each month. I thought I had done my part which is to notify them of my employment. The checks kept coming and I didn't question it. Now they want it back. They accepted my offer to make $25 monthly payments.

Here are my debts:

Card 1 : $7200 limit / $6500 balance / $113 minimum / 9.24% APR
Card 2 : $3000 limit / $2700 balance / $62 minimum / 15.65% APR
Other : $8700 owed to Social Security for disability overpayments

Can all of this be discharged in a bankruptcy? And what should I do next?

Thank you

[TheBajan]

Hello and welcome!

I'm sure others will come along with better advice but given what you have said, IF IT WERE ME, I would not file BK. You will not be able to discharge the social security payments. That means you will be filing on just $10K in credit card debt. It's great that they are allowing you to pay back over time at such a small amount per month.

Filing BK is like dropping the bomb to end the war. It should only be used as a last resort because once you file, you don't get to do it again for 8 more years. In your case, it's like dropping the A-bomb to kill a gopher... it's a bit overkill.

From what you are saying, if these are your only debts/obligations, as a single person making $13 an hour renting a room, it seems you should be able to work on paying these cards down. It sounds like your problem isn't your income as much as it is your spending. BK will not change your spending habits and it will not help you if you DON'T change your spending habits. Please do not take this as any sort of judgement... we've all been there. I just think it's important for you to know what you are really considering.

Get on a budget. If you can't make ends meet on a budget that assumes your credit cards are gone, you won't be helped by getting rid of them in BK. That would be the very first step you should take before making this decision. With only two creditors, even if you stop paying on the cards, it will take some time before they do anything about the debt. It will get sold and re-sold and you will eventually start getting offers to settle it for 20 to 30 cents on the dollar. In the meantime, plan to save up for that and when and when you are at a point you can negotiate to pay one off... do it and move on to the bigger one.

That would be my plan. [based on the info you've given]

Best regards and please keep us informed. We are here to help as much as we can.

The Bajan

[Pjmax]

According to Nolo, SS disability overpayments are eligible for discharge. I'm not an expert, so I hope someone who is will clarify.

[bookworm]

I'm sure others will come along with better advice but given what you have said, IF IT WERE ME, I would not file BK. You will not be able to discharge the social security payments. That means you will be filing on just $10K in credit card debt. It's great that they are allowing you to pay back over time at such a small amount per month.

In your case, it's like dropping the A-bomb to kill a gopher... it's a bit overkill.

I have to disagree here. I BK'ed on "only" $15,000. It's a relatively small amount, but I just couldn't make the payments. It was impossible.

With only two creditors, even if you stop paying on the cards, it will take some time before they do anything about the debt. It will get sold and re-sold and you will eventually start getting offers to settle it for 20 to 30 cents on the dollar.

Settling is risky. While you're saving up for money to negotiate with, the debt only grows, and the forgiven portion becomes taxable income. Plus, it only works if both your creditors are willing to settle. If Card 1 is willing, but Card 2 is not, you'll have to file BK anyway, and you'll be kicking yourself for settling Card 1 when you could have had it discharged in BK.

This is not to discredit The Bajan's advice. I'm just a different person with a different opinion.

Do work out a budget. If you can make ends meet AND pay off the credit cards in the foreseeable future (like three years), then continuing to pay them is always the best option. Otherwise, stop paying on them, and save for an attorney. In the mean time, consult with several. You might actually find one who will work out a payment plan. And based on the info you've given, it sounds like your case is pretty simple, which usually makes attorney fees cheaper.

And perhaps, after the cards are discharged, you'll be able to knock out the social security debt sooner.

Good luck, and keep us informed!

[Drazil65]

Hi, you are actually in a good situation to take on a second job to help with your lack of funds. No spouse or kids, no house to take care of and only one full time job leaves you with enough time to work a part time job to help yourself get out from under the debt. You need more income period!

Cut up all your credit cards, you cannot afford to have that obvious temptation in your life and saying that you need it for emergency is just an excuse. No easy fixes here and you will need to CHANGE your lifestyle expectations in order to have a bankruptcy be effective in your life. No more eating out or entertainment spending for a while, get mind set under control or a bankruptcy will never work. Find a roommate for an apartment or another room to rent.

You should make appointments with bankruptcy attorneys for your "free" consult to go over your options and ask questions. See several before settling on an attorney. Read all the stickies here at the top of the threads as there is much information here. With some serious preplanning and adjustments to your income with a second job/or lots of overtime you should be able to get back on your feet. Good Luck!

[angel7821]

I say do what you have to do to make life bearable. It is YOUR life and only YOU can decide what is the right thing for you to do. If you feel BK is the way to go then file. If you feel you can work 2 jobs and get out from under the debt then do it. Everyone here can offer their advice but in the end YOU have to make the decision on what to do. Best of luck to you.

[keepmine]

If, those SS overpayments can be included in the bk, I'd say go ahead and file.
But, going forward you hav to address the income issue. You can't support yourself on $13/hr. You'll always have to have roommates and drive clunkers, etc. That's nothing to aspire too. You need to start looking for a better payng job or, a pt/weekend job today.

[TXskyblue]

My take is that you are judgment proof. Low income and no assets. I think the chances of the credit card companies suing you is low. The SOL in CA is 4 years, so you could choose to stop paying your credit cards and just ignore the collection calls. After 4 years, they can not sue you. If they did sue you, they have nothing to take.

Or, you could file a CH7 and be done with it for the cost of a lawyer which is probably something around $2,500. You'd sleep better at night, I'm sure, but 10 years of a BK being on your credit is nothing to sneeze at. Finding a place to rent will probably become more difficult, utilities and cell phone companies may ask for higher deposits, and buying a car will be harder.

It's a toss-up as to which path you want to take. Do you realistically anticipate your income raising significantly? If so, I think BK may be the better choice. Do you think your income is likely to stay about the same for the next 4 years? If so, waiting out SOL sounds like a better choice. Ultimately, you have to choose what you're most comfortable with. Each decision comes with negatives, but you have to choose.

I don't know anything about SS overpayments. If those can be included in a BK, that would certainly tip the balance toward filing BK. Owing the government is never fun or easy. You don't want any part of that.

[kornellred]

Regardless of whether the SS disability overpayments are dischargeable, The Social Security Administration will not forget. If and when you get to retirement age and apply for ordinary retirement benefits, they will be offset by the amount that was discharged in bankruptcy. Do not forget - a discharge only frees the debtor from an obligation to pay - it does not erase the debt.
You would be wise to repay the overpayments no matter what happens.

[df04527]

^Wow....awesome info.

[keepmine]

According to the SS procedure policy, debts to SS that are discharged are not collectable.

https://secure.ssa.gov/poms.nsf/lnx/0502220040

[TheBajan]

Regardless of whether the SS disability overpayments are dischargeable, The Social Security Administration will not forget. If and when you get to retirement age and apply for ordinary retirement benefits, they will be offset by the amount that was discharged in bankruptcy. Do not forget - a discharge only frees the debtor from an obligation to pay - it does not erase the debt.
You would be wise to repay the overpayments no matter what happens.

This is very true. My grandfather was stuck unable to sell a house due to a 30 year old lien placed on it having something to due with social security over-payments. He died with it still unresolved.

[InT00Deep]

Ok, couple of things I'd like to respond to here.

This is probably going to be my level of income for the foreseeable future. I don't have a college degree. I work in a skilled trade. My job doesn't pay a lot but I do have good benefits. Those benefits came in handy because I was recently diagnosed with sleep apnea. I had to pay for the breathing equipment out of pocket ($800) but the testing was all covered by insurance. Had to put the equipment on credit card as I don't have that sort of cash on hand. As far as having a credit card for emergency... I would argue that if my machine breaks that's a valid emergency. Sleep apnea is one reason I may not seek a part time job. My job already demands occasional overtime and some nights are worse than others as far as my sleep quality goes. Leaves me very tired at the end of my shifts. I haven't used my credit cards in about two months and I have cut back on my spending drastically. The amount of money I make isn't really what got me into this situation. It's my lack of managing the money I do have. I could afford to make the minimum payments right now, but I am not able to save much money while doing that. I need to have an emergency fund (work slows down during the holidays / medical equipment breaks / car breaks / need to move into an apartment / etc). I really would like to avoid having to file but I'm not sure what else to do. At the rate that I'm paying off the SSI, it will take me 29 years. If they're ok with that, then I guess I am too.

Here are some numbers:

Amount I make per month : $1600
Rent: $400
Gas: $100
Car Insurance: $56
Cell Phone $50 (looking to lower this soon)
Food: $200

Those expenses use up about half my income. If I pay my credit card minimums, that's about $200. So I have $600 I can put into savings. If I have to move into an apartment... My rent goes from $400 to probably almost $700 or more. But I can walk to work, so my gas is now almost $0. I'd be able to put less than $400 per month into savings.

I already missed one payment... Now looking at the numbers I'm wondering if I should try to settle with them?

[TheBajan]

TooDeep,

Can I just say how much I respect and appreciate your perspective? Most people are not willing to take the responsibility like you are. It could be so easy to blame your situation on a low income but you don't. I gotta tell ya, that REALLY IS IMPRESSIVE! and refreshing. You are going to be fine. Yes, you have issues to address. Your attitude tells me you are ready to face them. Keep posting. I'm sure you will gets lots of good advice and support here.

My very best wishes to you!

The Bajan

[InT00Deep]

TheBajan,

Thank you for the kind words... I like your idea above about stopping the payments and trying to settle. I'm just afraid of getting a notice to appear in court or something!

It seem as though I should really only consider my debt to be about $10,000 now. If I can continue to just make those $25 payments to SSI.

How much is this route going to damage my credit vs filing bk?