I'm in a tough spot, and I'm hoping to get some advice, as I can't really discuss this with friends or extended family. I'm not sure where to begin, other than my current situation. I currently have several creditors coming after me for money, all at once. It's like they have sensed someone else is gouging me for money, so they are taking their turn at me, too. I currently owe the state about $12,000 for state taxes, another $13,000 or so in federal taxes (I'm making payments each month) and I have a garnishment of 25 percent of income for $3,000 in medical bills. On top of this, my car was repossessed last year, and I have a judgement against me for about $3,000 (making monthly payments to pay this). The bank that financed my car also tacked on several fees to my checking account before they closed it, so I owe them about $800. Student loan debt of $2,500. I earn about $75,000 a year, but I pay about $1,000 per month for family medical expenses. All told, I owe about $31,000, and everyone wants their money now. The state actually has a private collection agency that collects money for them, so I have to talk to them, and today they called me at my job. They said they were willing to break up my state tax bill into three payments, which of course I don't have. I offered to work out a payment arrangement with them, and they said they "weren't authorized to do that." At the beginning of the year I moved into a trailer home to save about $500 per month in rent, and my plan was to apply that to debt. I had just finished paying my moving costs and was ready to start attacking this debt when I got hit with judgements and the current garnishment, which will take at least $900 of my pay each month for the next 3 months. To say that I am a bit disheartened would be an understatement. I'm not really sure where to start in attacking all this debt, and everyone wants to be paid today. At this point, I'm concerned about being able to keep a roof over my head, food on the table and continue covering the high cost of my spouse's medications. Filing bankruptcy isn't really an option, because I would not be able to discharge the taxes or the student loan debt. Suggestions?
Okie - there are some alternatives to bankruptcy that may apply here. That said, if your phone is ringing off the hook than the first thing you can do is write a letter to the agency telling them to stop calling you. This is a right you have under the FDCPA, and you can find a sample letter for use here. It sounds like the next thing to do is prioritize the debts one at a time (taxes and wage garnishment aside). For the biggest debts, restructuring or settling a debt could be an option - just know that the person you speak to on the phone is rarely (if ever) in a position to make this call so these will have to be documented. (Written letters, etc.) Also, are any of these debts nearing the SOL? If so, you may want to focus on the newer debts as they are the ones that make you most vulnerable for a court summons, plus you don't want to awake a sleeping debt. (Although it sounds like most of these debts are wide awake.) There's also the debt consolidation route, which I don't usually recommend but it might be worthwhile in this case, since it sounds like there are a lot of moving parts going on here and it may be easier to deal w/ one entity if possible. All that said, your rent, utilities and medical expenses always come first - these debts are secondary, no matter what these collection agencies may be telling you over the phone. I guess my best advice is to decide whether you want to attack these debts one at a time, or attempt the sweeping debt consolidation route (here are some unbiased reviews on companies that do this).
I don't really qualify for the debt consolidation route. I don't have a home or anything to really up for collateral, which a lot of these places seem to want. Also, I feel like I would just be shifting debt around and not really addressing it. I have been looking into Dave Ramsey's "debt snowball" plan, which sounds similar to some of your advice. My pay will be garnished for about three more months, so that plan is really on hold until the garnishment is over. Once I get 25 percent of my income back, I can start attacking these smaller medical bills that are arriving at my doorstep. The one expense that concerns me most right now is the state tax bill. I got a phone call a week or so ago from a collector telling me I owed $12,000, but I got a notice in the mail today that I owe $18,000. Where the other $6,000 came from, I don't know, but I planned to send a letter to the collection agency asking how they arrived at that figure. I have already asked for a payment plan with them, and the most they were willing to do is break it up into three payments. Well, I can't afford to pay $6,000 at a crack. I would consult a tax attorney, but I can't afford that either. I honestly feel like I am in "debt slavery."
Okie: I second Jason on getting the calls to stop. The important thing is the watch the verbiage in the letters, the form letter Jason linked to is good.
What I really need is a validation letter. I need the state to spell out what I owe for each year they are trying to collect, the amount of tax, the amount of penalties and interest, etc. Is there a letter like that you can recommend?
The problem is that taxes are not debts under the FDCPA. You may get them to provide validation anyway, but they are not required to validate, because they are not 'debts' as defined by the FDCPA. In the sample letters forum there are examples of validation letters, but it's best to say what you just said. "I need you to prove exactly the amount that you are trying to collect, the years of the taxes that you are trying to collect, the amount of the penalties and interest for those years."
Actually, I believe this IS covered by the FDCPA because the state has hired a collection agency to collect this debt from me, and the back of the letter they sent to me indicates I have 30 days to dispute this debt in writing pursuant to the FDCPA. I have written a validation letter and I will be mailing it tomorrow. I think my next step after that will be to apply for an "offer in compromise" and attempt to get this debt lowered somewhat. I don't have assets or money to cover the amount they want from me right now, and they won't work out a payment plan with me. I don't think I have any other options other than that, short of filing for bankruptcy, which I'd like to avoid if at all possible.
Just because the state turns a debt over to a collection agency, doesn't make it a debt. Applicability of the FDCPA is a many-pronged fork. (1) The OC has to give the account to someone else for them to collect (or use another name to collect the debt for themselves). (2) The account has to be primarily to pay for personal, family or household purposes. (Not a commercial account, a tax debt, fines, etc.) (3) The third-party has to regularly engage in debt collection, luckily the courts have made this prong very liberal to cover most debt collectors. (4) The third-party is not a state or federal government employee. WHILE THEY ARE ACTIVELY PERFORMING THEIR OFFICIAL STATE, OR FEDERAL GOVERNMENT DUTIES. Per the FTC Commentary: This would fail on at least the 2nd prong, because it is not for personal, family, or household purposes. Any attempt to bring an FDCPA action against the collector would hopefully give even a dime-store attorney a one sentence answer which would defeat the suit.
Oh, and a CA letter will always have the validation information on the letter, because it is a violation of the FDCPA to NOT include it if there is even a 0.00000001% of a chance that the debt could be considered a debt. They don't want to come before the one judge who would listen to the argument that "state personal taxes" are an obligation which does arise from personal purposes. i.e. "as an obligation for living in the United States, or the State of Xxxxxxxxx, you are responsible to the government to compensate it for a portion of the services which you utilize for personal, family or household purposes." It's not illegal to represent that the FDCPA applies if it doesn't apply to a particular debt, but it is illegal to not say that the FDCPA applies if it does. Now, some of the larger CA's have been taken to task by the FTC for violating the FDCPA, and they may be under a consent decree to apply the FDCPA to all accounts as a requirement of the consent decree; but there is a nuance of difference between violating an FTC consent decree (non-actionable by consumers), and violating the FDCPA (actionable by consumers).
My sister gave me some Dave Ramsey books. I think it is great advice and I will try and follow it to pay down your debt. Thanks! Heather with BoostMyScore.NET
