How likely is it that a Credit Card company will sue you for unpaid debt?

[Anonymous]

OK, here's my situation. I was laid off almost 4 years ago. I have a small business, but it's barely keeping me afloat. In fact if it wasn't for family, I WOULDN'T be afloat. Job's in my area are scarce. To date, I have yet to find a job that would make me more money than my business, even though my business isn't doing well.

I've tried on several occasions to get out of Credit Card debt, but somehow in never works. My savings are drained. My 401K is gone. I've often had to make the choice between groceries and a Credit Card payment. In the end I often had to pay the Credit Card, then use the Credit Card to buy the groceries. Haven't done that in while, but it wasn't helping when I had to do it.

I have 2 CC's, totaling about $18,000 in debt. One is $13,500, the other is around $5000. A significant portion of that debt is interest. My interest rates are at 20%.  I haven't used either in at least 6 months.

Bottom line, I can't live this way.

The money going to the CC's could instead be going to growing my business. Instead my stock just keeps getting drained because all the money I make goes to debt rather than new stock.

This last month I decided to do something about it. I sought out the help of a Debt Settlement company. I didn't just throw a dart, I really looked into them. Talked to about 10 different companies before choosing the one I was most comfortable with. The plan is to settle my debt for 40% of the total, over the next 3 years.

However, both CC's insist that THEY DO NOT DEAL WITH DEBT SETTLEMENT COMPANIES!

So, 2 questions. 1) What's the truth? Do CC's deal with Debt Settlement companies or not? Or is it just a matter of semantics, and the Debt Settlement companies really deal with the Collection Agencies that the Debt is turned over to? 2) in the mean time, the CC's are not getting their money. How likely are they to sue me vs using a Collection Agency? Is there a Dollar Amount tipping point? Like at $10,000 they use a Collection Agency, but at $10,001 they sue?

I'm right at the cross roads of a major decision here, and I really need to know the answers.

Roger

[Anonymous]

CapitalOne almost ALWAYS sues and they sue as the original credit much of the time.   OC lawsuits are harder to beat because they have all the documentation.  You can still fight them but it's harder with an OC than it is with a collections agency that has no documentation.

Keep in mind that most of these credit card default judgement suits are bulk filers that enter very little supporting documentation into evidence in their complaints.   90% of these cases can be thrown out if the borrower simply shows up to court and contests the plaintiff, especially if it's coming from a collections agency and not the original creditor.  

You can find a NACA lawyer or any Community Legal Services agency in your county of residence can assist you if you're not familiar with your municipal/county court if you are served.   The most typical borrower defenses are:

- The plaintiff has not proved that the debt belongs to the borrower

- The plaintiff has not proved that the debt amount is legitmate

- If the plaintiff is a CA or Junk Debt Buyer,  has not proven the right of assignment was legally obtained

- The CA/JDB is not licensed to collect this debt in this jurisdiction and therefore has no standing to sue for recovery

- The debt falls out of the Statute of Limitations for Oral.Written Contracts for this state and therefore cannot seek relief

The older the account is and the more hands it has changed since you defaulted, the more likely you will win.

Here's a VERY GOOD ARTICLE in the Times about this topic:

http://www.nytimes.com/2010/04/02/business/economy/02garnish.html?scp=7&sq=credit%20card&st=cse

[Anonymous]

BTW on Debt Settlement Companies...

DSC's are in a category on the likes of  "credit repair" companies.   They are offering a service that isn't necessary; the borrower can negotiate for debt settlement on their own.   Debt Settlement Companies try to fob themselves off as masters at obtaining payment plans for various consumer lending products.

The truth is that their results are mixed.   Many banks like the 2 you are dealing with have told you flat out that they will not deal with DSCs, they will only negotiate with you, on THEIR terms.   That's about all you can do.

In your particular situation, I would strongly consider Bankruptcy protection as a better method of eliminating your credit card debt and rebuilding your savings.   You will have to think long and hard about this one because you're a sole proprietor and the BK13 payment plan might be just as onerous as the credit card payments you were making before.

I would try to find a lawyer in your area that files bankruptcies and call him/her for a free consultation to explain your situation.   Your lenders might be more willing to deal with you once they discover that you are heading towards pulling the Bankruptcy button.... card companies lose big time when the borrower files BK.    As long as you were paying the debt they were minting themselves money even if you weren't doing anything to bring your principal down.    In Bankruptcy, the Trustee will often force the CC to take a haircut... at minimum wiping off all the interest and putting the principal on a payment plan.    You then pay the Trustee a fixed monthly payment until the Plan is completed and your debts are marked IIB on your credit reports.

Your BK Trustee might force you to liquidate some assets before you're permitted to have your bankruptcy discharged.   If you have multiple vehicles, motorcycles or peronsal recreation vehicles you may have to liquidate those before the Trustee is willing to set up your plan.      Or depending on your situation you may be able to go into BK7 instead.

For any others who are in a similar situation as this poster:   DO NOT LIQUIDATE YOUR 401(k) or IRA ACCOUNTS TO PAY OFF CREDIT CARDS.   EVER!

401K accounts and IRA plans are "ERISA Protected Accounts".   The ERISA law which governs retirement plan accounts places a permanent legal protection against the Bankruptcy Code.   No creditor, not even a Student Lender, can go after your retirement savings accounts should you enter into Bankruptcy.   You can also have millions of dollars in an ERISA account and still file for bankruptcy and those monies are protected.

If you are in a situation where your personal savings is draining away and you are unable to repay creditors due to job loss... it is financially better for you to pull the BK lever before you ever think about touching those 401K or IRA plans.    You need this money for your retirement.  You do not need this money to repay credit card debts and the LAW protects you from having that money taken away from you should you ever default on any personal loans.

[hawkeye33]

Regarding your question on dollar amount, I had some financial struggles a few years ago, and I completely let a Capital One $300 card go, and the over limit and interest grew it to about $1100 balance. Capital One sued me at this dollar amount, so I woult think that if they do have a dollar amount threshhold, your balances are well past it. Hope it all works out for the best.

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@Anonymous wrote:

So, 2 questions. 1) What's the truth? Do CC's deal with Debt Settlement companies or not? Or is it just a matter of semantics, and the Debt Settlement companies really deal with the Collection Agencies that the Debt is turned over to? 2) in the mean time, the CC's are not getting their money. How likely are they to sue me vs using a Collection Agency? Is there a Dollar Amount tipping point? Like at $10,000 they use a Collection Agency, but at $10,001 they sue?

I'm right at the cross roads of a major decision here, and I really need to know the answers.

Roger

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[Anonymous]

Well the good news is that I'm not with Capital One

Fortunately, my 401K was never very big to begin with. In fact at the time, for at least a full year before I liquidated it, I was slowing loosing money on it. The plan to pay off the CC's almost worked at the time. But we had a major emergency at just the wrong moment, and the money had to go to that instead. So that plan was shot before it had a chance to work.

I do have a question though. What's an OC?

Roger

[Wolf3]

I tried the Debt Settlement route and I can not recommend it.

They charge a lot and they get there money first just to be your mouthpiece.  After a few bad settlements, we dropped them and settled the rest by ourselves.   The creditors will tell you they expect bigger percentage since you can afford to hire the debt service company.   One creditor sued immediately and the debt settlement company did not help with that.    We settled for a lump sum 70% to avoid lawsuit.  It was a disaster.

You need a bankruptcy attorney.   You are classic Chapter 7.   It will give you a clean start.

You may be able to settle for low percentage ( 10 to 20% in installments ) even you leverage the bankruptcy threat.   If everyone plays you are good, otherwise BK7. 

OC (original creditor) 

[Anonymous]

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@Anonymous wrote:

I've tried on several occasions to get out of Credit Card debt, but somehow in never works. My savings are drained. My 401K is gone. I've often had to make the choice between groceries and a Credit Card payment. In the end I often had to pay the Credit Card, then use the Credit Card to buy the groceries. Haven't done that in while, but it wasn't helping when I had to do it.

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Food stamps.  Seriously.   Even single people can qualify for food stamps, where most of  aid money you see being offered out there in practice only helps folks with children (and folks who know how to work the system, no comment on that).  Something about farm subsidies allowing it.  I don't know.  I don't really care.  Here's the government's federal site on the program, and who is eligible.  The majority of the text deals with illegals and legal immigrants eligibility.  But if you meet the income requirements, as a US citizen, you are supposed to get aid.  Anyone here (besides Craig T. Nelson) ever actually gone through the practice? 

[Anonymous]

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@Wolf3 wrote:

I tried the Debt Settlement route and I can not recommend it.

They charge a lot and they get there money first just to be your mouthpiece.  After a few bad settlements, we dropped them and settled the rest by ourselves.   The creditors will tell you they expect bigger percentage since you can afford to hire the debt service company.   One creditor sued immediately and the debt settlement company did not help with that.    We settled for a lump sum 70% to avoid lawsuit.  It was a disaster.

You need a bankruptcy attorney.   You are classic Chapter 7.   It will give you a clean start.

You may be able to settle for low percentage ( 10 to 20% in installments ) even you leverage the bankruptcy threat.   If everyone plays you are good, otherwise BK7. 

OC (original creditor) 

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Unfortunately, all of THIS.   Here's a ghost  KUDO, since the mods had to take the system away due to abuse.  As for companies who don't deal with debt settlement companies,  I know DISCOVER is one who only deals with two.  If the company you choose is not one of the two, you're SOL.