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charge-offs with multiple cards, and related question to USBank

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stormidai
Member

charge-offs with multiple cards, and related question to USBank

New to myFICO, but a few basic questions concerning charge-offs.

Due to a series of events, we had to stop paying quite a few credit cards about six months ago. We are reaching the charge-off point on those now. I've spoken to a local bankruptcy attorney who told me that we would be "wasting our money and resources" at this time filing bankruptcy, despite our large debt, because we are currently judgement proof--my husband is on unemployment (wages cannot be garnished), I work part-time (my wages fall within exemption guidelines and I do not make enough to be garnished), we do not own our home, one of our vehicles is 22 years old and worth KBB *maybe* $500 and our other vehicle is currently upside down in its loan with no equity on it. Our property is minimal and falls within property exemption guidelines. We were told that while charge-offs are not ideal, our best bet at this time is to let them charge-off and attempt to settle the debts when we have the funds to do so--we generally get a sizeable tax return (mostly tax credits from being low income and having three children) and my husband is going back to school in the spring and will likely be getting financial aid that exceeds the cost of tuition and books--all of that excess income will go towards making as many settlements as possible.

Current concerns---
a) Is each company required to notify us if/when an account is charged off?
b) If they charge off this year, will we be getting a 1099C that will apply towards our tax return for this coming year, or can it come at any point over the years in which the SOL applies?
c) If my USBank card is unsecured, but I have other accounts with USBank (like checking, savings, and a reserve line, all current and positive standing--checking receives my pay & husband's unemployment benefit pay, savings has < $5, and the reserve line is near the limit but not late or over limit), they can't attempt to take payment from those accounts without securing a judgement first, correct? And in order to do so, they would have to sue, me be served with a summons, a judgement put in place, and THEN they could possibly freeze / levy accounts until we could prove that income within said accounts was exempt income...right??
And last of all-- if / when credit card companies sell or turn over an account to a CA, are they required to notify us by mail?

I never dreamed we would be in this position, and we WANT to pay this debt...we just CAN'T at this time. Talking to the companies and keeping them current of our situation has done nothing to stop the daily phone calls and we've reached the point where we pretty much don't answer the phone :/  At charge-off point, is is still beneficial to ask for a DV and send a cease & desist letter? I've read on some forums/blogs that sending a cease & desist letter can actually backfire and speed up legal action against you, and we don't want to do that....

Message 1 of 6
5 REPLIES 5
llecs
Moderator Emeritus

Re: charge-offs with multiple cards, and related question to USBank

a) No.

 

b) Charge-off doesn't really mean all that much. A creditor can charge-off a debt, but still own the debt and still collect on the debt. It's when they truly give up on it (or you settle for more than a $600 or more savings) that they'll issue a 1099-C (usually). SOL doesn't matter in the case of a 1099-C because a 1099-C is a federal requirement vs. state.

 

c) They might be able to take from your other US Bank accounts. Check your agreements. Most banks do place in the agreement that if you owe them money they can seize from your other accounts without a judgment. If concerned, certain open other accounts at different banks.

 

If an orignial creditor, like US Bank, sells a debt to a CA, that original creditor doesn't have to notify you. However, the new collection agency must notify you via mail within 5 days of commencing collection activity (e.g. reporting, calls, letters).

 

___

 

DV letters can only go to collection agencies. I wouldn't send a C&D. I'd just ignore them and slowly save to the side.

 

Remember, this is only temporary. I'd grab anything for temp income and then save up on the side. Once you have it saved up, then certainly you can offer less for a settlement. It's only 6 months. I bet you have several more before even sweating a potential judgment.

Message 2 of 6
stormidai
Member

Re: charge-offs with multiple cards, and related question to USBank

Thank you!! The length of time between charge-off and potential lawsuit has been my biggest concern of all to be quite honest, followed by who is more likely to sue than others (as in...who would be better to attempt to make settlements with first vs. who would be easier to wait a little longer and save up). Two of the accounts are $500 or less, and none are more than $5000 (well, after fees one has reached over $5000, and that is the USBank one). But collectively between everything at or reaching charge-off status, we are looking at close to $15000 in debt that *could* be sent to collections, or we *could* be sued over at any point in time Woman Embarassed  We HAVE managed to stay current on our reserve line with USBank (and are no longer utilizing it, only paying it), my husband's cornwell tech credit card, the Dell account, and I managed to negotiate a pretty decent repayment plan with my Peebles/Comenity card that is easy to handle. We also are current on the car payment and have never had a late payment listed with them.

Are there certain companies more likely to sue than others? Or does it more rely on overall balance owed?
Is it wise to let the OC know that my husband is on unemployment and I only work part time and that we are judgement proof? Like....to essentially let them know that potentially pursuing action will not get them anywhere with us at this time? I don't want to come across as saying "hahaha, you're not getting anything and you can't do poo about it"...but really....they won't. Even if they enter a judgement, we still won't be in a place financially to pay them, kwim? The bankruptcy attorney I spoke to said that tax refunds and financial aid proceeds aren't garnishable either and that a judgement for unsecured debt cannot go after that $$ either unless it is deposited into our checking account and the account is levied.  I have already moved my paycheck over to a pay card vs. direct deposit, and DH's unemployment is direct deposited but it very clearly states on the direct deposit that it is from unemployment benefits, so even if they *do* attempt to levy the account, it should be fairly simple to prove that they are exempt funds.

My HOPE is that we will be able to make settlements on as many as possible with the tax return/financial aid in february/early march, and then ideally be able to handle payment arrangements on one or two cards at a time throughout the year until they are all paid off. Jobs in our area are....really...almost nonexistent. A second or third job for me, or even a single job for DH would help a LOT right now, but its just not happening in our job market. My husband has been laid off since the beginning of August and even with a great resume and tons of experience in his field, he hasn't even had a single callback or interview Smiley Sad  I was job searching for close to a year before managing to score an interview with my current employer, and they aren't even hiring full-time employees anymore...but desparation led to me jumping on the part-time offer because it was *something*. There's only a couple third shift/24 hour places around here (even the local walmart and gas stations aren't 24 hour), and we're really struggling with the financial side of both of us working vs. childcare costs--when DH was working full-time and I was part-time, we were barely netting anything from my paycheck because of daycare costs for three children, but it was a liiiiiiiiitle bit extra each month so we hung on with it.

Message 3 of 6
stormidai
Member

Re: charge-offs with multiple cards, and related question to USBank

And on that note....I cannot seem to find anything within the credit card agreement stating that they can take money from my account, but perhaps I'm not reading something correctly or missing something. Does anybody have any experience with a charged-off USBank card and having other accounts with them?

Message 4 of 6
RobertEG
Legendary Contributor

Re: charge-offs with multiple cards, and related question to USBank

The taking of a charge-off by a creditor is an internal business/bookeeping measure they chose to take.  It moves your unpaid debt out of their receivable assets column and shifts it to an unreceivable, bad debt column,thus reducing their overalll assets and reducing their tax obligation.  They are not obligated to inform the consumer of theri internal accounting and tax activities.  Credit reporting of the CO is optional, and if reported, is damaging in that it informs others reviewing your CR that the creditor has determined that you are not going to pay the debt (in accounting lingo, they consider it as now being "uncollectible").  FICO scores it, and prospective creditors are less likely to lend to a consumer that has a reported history of stiffing on their debt.  It is very damaging reporting.

 

The consumer still owes the full amount of the charged-off debt, and the credtior and/or debt collector can still continue to report to the CRAs and attempt collection of t he fulll debt.

Thus, taking of a CO does not, in and of itself, excuse or cancel a penny of the debt.

A form 1099c is only sent if they decide to actually cancel a portion or all of the debt.  Therafter, that amount is no longer debt, and no one can attempt to collect on it.

 

Cancelled debt is considered under the tax code as psuedo "income" to the consumer, and you must then pay taxes on the amount if it is $600 or more.

Message 5 of 6
stormidai
Member

Re: charge-offs with multiple cards, and related question to USBank

Bumping to see if anyone has any experience with USBank charge offs when they have other USBank accounts.
Message 6 of 6
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