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I have around $50k in debt, around $12k in credit card debt and $38k in student loans. I've had a rough time since graduating, unable to find a job, actually ending up homeless for a while. I haven't made a payment on any of my debt in over a year, and all of my debt has defaulted / went to collections. I'm now beginning to clean up the mess, and for the first time in my life I'm on a written budget, and I'm going to be putting $200 a month towards an emergency fund, following Dave Ramsey's Seven Steps. I don't have a bank account, and I'm afraid of opening one for my emergency fund for fear that my account would be frozen and my money seized for payment of past debt. Should I stay cash only or are my fears unfounded? Thanks. |
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Derek, are there judgments against you? If there are judgments, then your bank account could be subject to a writ of garnishment. I don't know where you live, so it would depend on the laws for your state. I recommend contacting the pro bono legal services for your area to determine the laws for your state. Certain types of wages may not be garnished. If nothing has been reduced to a judgment, your fears may be unfounded. Typically, the collections agency cannot do anything until there is a judgment in place so that they can garnish your wages. I still recommend looking at the law in your area to determine whether this is true for your state. I can only base this on the law that I am familiar with. I live in Tennessee. Nothing has been reduced to judgment, at least as far as I know. At least I have yet to be served regarding proceedings. I was under the impression that in the case of student loan debt, a judgement was not needed for garnishment or seizure?
(Jan 04 at 15:46)
Derek
I'm honestly not familiar with collections law for student loans. If they can garnish it without a judgment, they will do so if they can find the account. Can't give you legal advice, but it might be a good idea to call and try to negotiate terms for payments so that they don't try to garnish you. Have you looked into bankruptcy for the credit card debt? Many areas have pro bono attorneys working in the bankruptcy field. (I am a corporate litigator, so none of this is my specialty.)
(Jan 04 at 21:19)
Frugallawyer
To be safe, I think I'm going to wait until I consolidate my student loans under the new IBR (income based repayment) the government is offering before opening an account. Under IBR, I think my monthly payment will drop to $0. I do hope to file Chapter 7 this year, but I haven't been able to find a pro bono lawyer... though maybe I don't know where to look.
(Jan 08 at 05:24)
Derek
Check with the TN Bar association. Ask them to put you in touch with the pro bono legal services for your community. That is probably the best place to start.
(Jan 08 at 05:40)
Frugallawyer
This eventually led me to Legal Aid of East Tennessee, but they told me they only help if there are judgments against me. I have found a women locally that I like who I will be meeting with next week. I already have been told that it will cost $1300 which includes filing costs but does not include the mandatory courses I'll need to take before and after filing.
(Jan 12 at 17:54)
Derek
I've filed for a student loan consolidation from Direct Loans which, under the Income Contingent Repayment Plan, should lead to $0 monthly payments for me, while clearing my tax offset. Once the offset is clear, I have three years of tax returns to file, which should result in a lump sum tax return large enough to pay my Chapter 7 lawyer and pay for the mandatory classes. I'll be opening a bank account as soon as the debt consolidation sticks especially because I've read some people have difficulty opening an account after filing bankruptcy.
(Jan 12 at 17:58)
Derek
I'm forced into the ICR payment plan for my consolidation loan, since my loans are in default. It is my understanding I'll be able to switch from ICR to IBR roughly three payments inside the loan, which should be to my benefit. Six months from now I should be debt free except for my student loans, which will have an income based payment of, for now, $0, and after 25 years any remaining balance will be forgiven. This is my plan. I'm spelling it out here on the off chance it helps someone else in a similar situation to mine who hits this page.
(Jan 12 at 18:03)
Derek
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Ditto everything Frugallawyer said. Also, you didn't mention it, but if you owe the IRS, they are very good at finding bank accounts. On the other hand, they are also awesome about working out payment plans. Good luck! I've found the IRS to be helpful in general. Very professional when I call with questions around tax time.
(Jan 11 at 06:34)
mbhunter ♦♦
From my calculations, the IRS owes me, actually. But I have three years of returns I need to file counting the one coming up this April 15. I wasn't particularly good about filing when I expected everything they owed me would instead go to delinquent student loans. I'm mailing my student loan consolidation application today, and I will begin working on filing once duplicate W2s make their way to me.
(Jan 11 at 14:31)
Derek
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