Bankruptcy Law/Should you default on cards one at a time or all at the same time.
I know I will have to default on my credit cards, I have 4 cards, and can't keep draining my IRA to pay them. I'm 59, unemployed for 6 years, became my mother's caregiver 6 years ago. I am judgement proof, only have an IRA, no assets, living with my mother as her caregiver, won't be going back to work. If I have to default on the cards, should I do it one at a time or all at once? I owe between $6000 and $9000 on each. I will stopping charging on each card for 90 days, before defaulting. I'm wondering if spacing them out would mean I wouldn't get 4 separate summons or have, 2, 3 or 4 different court dates at the same time. I will show up for them, even if I don't have a defense. I'll take responsibility for this and explain my situation.
As I understand your situation, you are probably taking the worst of all possible actions you could take in that the way you are going you are exhausting your only source of income (in this case your IRA) to make a hopeless attempt to pay part of the bills that you are probably never going to be able to repay - When the mounting interest is considered that you are paying on the cards, you would have been better off not paying them anything. As for your showing up for the credit card actions if they sue you (so, as you say, you can explain your situation), the reality is that if you have not paid what is due on the contract, the judge is simply not going to care what your explanation is - he will render judgment against you just as if you had not showed up.
So what can you do about this?
Negotiation - You will find that this doesn't do you much good. They will be glad to take your money but they will still leave the lawsuit and the default on your record - and even if there is no default, they will not settle for anything that is reasonable. Trying to make a meaningful negotiation with these people will be futile.
Don't pay and fight them if they sue you - This is better than a negotiation strategy, but not much better. You can challenge them to prove their case if they sue you, and occasionally putting up a fight will get them to back off, but that is the exception rather than the rule. On the other hand, if you were going to negotiate, that would be the time to do it - they would tend to get more reasonable if in your defense of the lawsuit you were causing them to go to extra work, that, from their standpoint, they could be using on other cases that they had a better chance of success. However, the main problem with waiting until they sue you is that they would sue you one case at a time and you would be dealing with multiple suits, not just one. Plus, if you purposely go into default and then fight or negotiate, in the meantime, the default would wreck havoc on your credit report while you continued to fight them - and you might end up having to pay them anyway.
Bankruptcy - This could be a good option for your situation. First of all, the IRA is protected in bankruptcy by the federal Employee Retirement Income Security Act (ERISA) and as a result, any amount you have in an IRA will not be part of the bankruptcy estate. Depending on facts you don't state in your question, it is very unlikely that you would lose anything in a bankruptcy. The effects of a bankruptcy on your credit may not be as bad as you think. In fact, in a backward sort of way, the bankruptcy could be a positive on your credit in your situation in the sense that if you file for bankruptcy, you will have no more debts - and therefore you income percentage as compared to your debt will be increased - and income to debt ratio is a very important factor in determining your credit score. The big negative in doing a bankruptcy is, for most, attorney fees. Depending on where you are located, it is not uncommon for most lawyers to charge you 1,000 to 2,000 for attorney fees for a Chapter 7 or twice that for a Chapter 13. Sometimes the attorney will let you pay that out in installments, but usually if they do that they will not file the bankruptcy until you pay the entire attorney fee. If I did it for you, I would charge you $250 if you were eligible for he simpler Chapter 7 bankruptcy, or I would charge you $350 if you had to file a Chapter 13 instead of a Chapter 7.
This would be much easier to talk about on the telephone and I can then give you some more concrete answers and explanation depending on your particular situation. You are welcome to call me whenever you wish. I will not charge you just to talk on the phone. I look forward to hearing from you if you decide to call.
Jack Hall, J.D.