help me make sense of what we need to do?? :/

[stormidai]

Income tax return will be quite a bit larger than expected. DH is laid off and will be losing unemployment benefits around mid-February (unless extended benefits are approved)...he'll be going back to school starting next week and we'll also be getting a surplus from pell grant thanks to him qualifying for other grants based on being laid off from his industry.

Obviously if he doesn't find work or extended benefits aren't approved, we'll be having a significant cut in income. My income alone will NOT make ends meet.
Gut instinct says to hoard tax return and pell grant to help make ends meet until he finds work and/or I find a better job/second job. Buuuuut....we have a lot of credit cards in collection, 2-3 charge offs each (all from after he was laid off and not being able to make payments). I would LOVE to be able to pay off and/or settle as many of these as possible to not have to worry about them and to start rebuilding our credit. The tax refund and pell grant for one semester will be enough for us to comfortably live off of, without including my income and assuming he doesn't find work and extended benefits aren't approved, and not including payments to credit cards but only covering what we're currently covering for 5-6 months and very very frugally for 7-8 months. During that time we could be saving my income (and hopefully his soon) to use for the other months and to start putting towards debt. At the same time--that amount could easily pay off a LARGE amount of our debt.

If the tax refund and pell grant were not taken into account as money available to us, we are considered "judgement proof" at this time...I don't make enough to be garnished, assets are low enough that we fall into judgement-exempt status if we were to be sued. My fear right now is that the credit cards that are charged off and/or in collections (all are less than a year into default, we stopped paying around April-June depending on the card in question) will be more likely to sue come tax return time, just assuming because they'll think we'll have money from a return, know what I mean? We haven't received any notices of intent to sue or anything, but do have stuff with different collection agencies.

And on that note...IF we are to go the route of using the money to pay off/settle debts...what is my best plan of attack? We have a few lines we have managed to keep current but that have high utilization (we're not using them any longer, but they were close to maxed out). I'm thinking pay to lower utilization but keep them open, yes? Or just keep making regular payments and not using, and attack the "bad" debt? What about ones in collection/charged off? Pay smaller ones first? Go for charge offs first, then collection status (some are just reporting as very very late, but not charged off yet), or the other way around? Just go for whoever is willing to work with us the best and go down the list based on how much we can cooperate with the collection agency? I'm not really sure what the best way to go about this is and I'm really torn at the moment between attempting to pay off the debt and not have to worry about it anymore vs. making sure we have a really good safety net if, God forbid, DH doesn't find work....I'm just really afraid that even if I *do* attempt to build that safety net, it'll be knocked out from under us if an agency decides to seek judgement. Help!

[ktl72455]

MY DH is drawing EUC as well and from what I have read and heard so far they will be doing a min 3 month extension. But before knowing this, I was like you, trying to re-arrange things to be with out his income.

List who you owe what and it will give a better picture for others to help with.

Breathe :-) I know it seems bleek but theres hope!

[0REDSOX7]

The bill is for a three month extension and must pass challenges from both republicans and democrats in the house and senate.

I would not count on that JUST YET.

With that being said, what is a "substantial" tax return? 

[ktl72455]

Dont count it yet, but keep filing and watch for updates like this:

Update January 7, 2014: The Senate voted 60 - 37 to approve moving forward on legislation that would provide for a three-month extension of expired unemployment benefits. In good news for those who support the extension, six Republicans joined the Democrats to move the legislation forward. There should be a vote on the bill later this week. If passed in the Senate, it will then go to the House.

[stormidai]

substantial = approx $9000-$9400 depending on the calculator I use online. Pell grant overage will be $2600-$2800. I'm adjusting my withholdings at work to reduce what I'm paying towards federal taxes, but most of that is EITC, child tax credit, that sort of thing.

Accounts in collection and/or charged off, all credit cards, vary from a couple at $500-ish, 3 at $1500-$2500 range, one at $3500 and one at $5500. I have received settlement offers for the first two at approx. $375 each (give or take $10),$1200-$1500 for the next set, $2700 for the next, and nothing on the largest. Accounts we have managed to keep current have balances of $900, $700, and $1300.  I just received a dunning notice today on the largest balance and haven't seen anything on the next largest from a collection agency and the OC calls once a week or so and leaves a message asking us to call back. Obviously lots of different scenarios there to pay these off if we use the full amount we get from tax refund & pell grant, or even just the tax refund and set the pell grant back in savings.

I'm leaning towards keeping the money from the tax return and pell grant in a separate account from our regular checking account and paying as better settlements are offered, or settling if one (or more) of the cards attempt to sue...then if we need the money for living expenses in the meantime we can use it, or when DH does end up finding work (please God let that be soon!), we can offer settlements from that money once we're in a bit better place financially on a general everyday paycheck scenario. Again though, my biggest fear comes from being sued because really...we've never been this far behind and had bills default or go to collections, and I really don't know how the collection agencies usually work :/  Am I correct in understanding in order to freeze our bank accounts and levy them they must have a judgement in place first, in which case they'd have to sue us first and us be notified of them suing? I know we don't have to be notified by our bank before they freeze the account, and I also understand that if we settle for a significant savings that we'll likely have to deal with a 1099 for our taxes at some point.

[ktl72455]

Again though, my biggest fear comes from being sued because really...we've never been this far behind and had bills default or go to collections, and I really don't know how the collection agencies usually work :/  Am I correct in understanding in order to freeze our bank accounts and levy them they must have a judgement in place first, in which case they'd have to sue us first and us be notified of them suing? I know we don't have to be notified by our bank before they freeze the account, and I also understand that if we settle for a significant savings that we'll likely have to deal with a 1099 for our taxes at some point. This is TRUE.

[ktl72455]

Which collections are showing on your credit report?

If the OC is calling, it hasnt been turned over to collection, at which time they can also be added to your credit report cause to negative items.  Is the OC showing on your credit report?  Balance? Any chance you can work out a payment arrangement with them? Is it medical or CC or ?

[stormidai]

All are CC, some with OC some with collection agencies. None that are in default have been willing to work with us on payments we can afford on our regular everyday budget, which is why we were hoping to settle as many as possible with the tax refund because we'll actually HAVE the money...but if income scenario doesn't improve, that refund will be needed to make up for loss of income and to make ends meet.

[ktl72455]

some with OC some with collection agencies.

None that are in default have been willing to work with us on payments we can afford on our regular everyday budget, which is why we were hoping to settle as many as possible with the tax refund because we'll actually HAVE the money..

IF you choose to pay them off, do a PFD. ( pay for delete) and offer less. I would worry less about having to claim income on taxes, thats another yr down the road.

[stormidai]

That's kind of my thought. IF one of them decides to sue, do you usually get a chance to settle before the court date, but after summons? Are they generally more or less likely to settle at that point? It's not ideal, obviously, but I kinda feel safest keeping the money available if needed, and not taking any action on them unless absolutely necessary (like legal action) simply because of the instability in the current income situation.