On Disability and cant pay credit cards any more Please help

[rd1210]

I Need Help.... I Live in New York. I was hurt at work and I am on worker compensation disability for over two years and I am collecting a Disability Pension and I am waiting for social security disability to start. So all my income is from Disability. I have about $40.000 it credit card debt. Three banks Chase, TD, Juniper I have been using these to live off of ( Food, Clothing, School Tuition, I have two Kids.) I also have a small IRA that I have been drawing on to help pay the bills. I cant afford to pay the credit cards any more its either pay the cards or pay the mortgage. Once I get the social security disability and settle the workers comp case I would like to settle the credit cards debt. But for now I cant afford to pay the cards.

What happens if I stop paying the credit cards.

Should I send them a letter explaining my problem?

Can they touch, freeze or garnish my checking account, which holds my only source of income?

Will they sue me and take me to court and have the court garnish my checking account or the disability pension?

If they can freeze or garnish my checking account how long will this take weeks, months?

I am terrified to stop paying them but I have no choice and I am worried about them touching the only source of money I have to pay the mortgage and to live on?

Please Help any info would greatly be appreciated

[rd1210]

I Need Help.... I Live in New York. I was hurt at work and I am on worker compensation disability for over two years and I am collecting a Disability Pension and I am waiting for social security disability to start. So all my income is from Disability. I have about $40.000 it credit card debt. Three banks Chase, TD, Juniper I have been using these to live off of ( Food, Clothing, School Tuition, I have two Kids.) I also have a small IRA that I have been drawing on to help pay the bills. I cant afford to pay the credit cards any more its either pay the cards or pay the mortgage. Once I get the social security disability and settle the workers comp case I would like to settle the credit cards debt. But for now I cant afford to pay the cards.

What happens if I stop paying the credit cards.

Should I send them a letter explaining my problem?

Can they touch, freeze or garnish my checking account, which holds my only source of income?

Will they sue me and take me to court and have the court garnish my checking account or the disability pension?

If they can freeze or garnish my checking account how long will this take weeks, months?

I am terrified to stop paying them but I have no choice and I am worried about them touching the only source of money I have to pay the mortgage and to live on?

Please Help any info would greatly be appreciated

[Guest usctrojanalum]

are you still current on you cards? because if you are you still are a ways away from being sued. How soon do you expect a resolution to your workers comp case? If within 1 year you can ride it out, but if you think it might take longer than that there are ways to stall once you are in court to give you some extra time.

[BV80]

What happens if I stop paying the credit cards.

The accounts will be placed with a collection agency, and you will receive calls and letters. Eventually, after no payments, the accounts will be charged off. All of this will be reflected on your credit report.

Will they sue me and take me to court and have the court garnish my checking account or the disability pension?

Yes, they could sue you. I may be mistaken, but I don't believe they can garnish disablitity or social security income. If you own any property, a judgment against you would be a lien on that property. It depends on the laws in your state as to how they could act upon that lien.

You could call them and try to work out a settlement with low payments. If there's a possibility that your income will increase in the future, they might be willing to waive your payments for a period of time. If they offer or agree to anything at all, be sure to get it in writing. Don't do anything without the terms in writing.

Contact a consumer attorney. Most attorneys give free consultations. Ask him your questions. He/she might have some helpful advice.

I hate to mention this, but there is always bankruptcy. It should be a last resort. However, for some people, bankruptcy can be a relief because of the burden lifted off their shoulders.

Edited December 13, 2010 by BV80

[nascar]

You need to know that your disability benefits are exempt from creditor claims. Make sure that any income from disability that you get, goes into a dedicated account that is NEVER mixed with non-disabilty funds. This is a precautionary measure that may pay off for you down the road.

If you can't pay, you can't pay. Simple as that, and don't let anyone intimidate you otherwise. Our longtime member "Recovering Attorney" is a New York consumer law attorney. Seek his advice for your more specific questions.

[Guest usctrojanalum]

Oh and your disability money cannot be garnished (and you are so far away from this ever being a problem), but NY enacted this for lack of a better term idiotic law in 2009 where it can be frozen.

Pre 2009 the Banks would check your deposits, sources of funds and determine if your account contained exempt funds, if your account had exempt funds the Banks would not freeze the account, if there was no evidence of exempt funds the banks did freeze the account. Now, this was not a perfect system and sometimes accounts with exempt funds did get frozen.

So fast forward to present day, now a bank is required to freeze any account with over $1700.00 regardless if there are exempt funds in the account or not. If there are exempt funds you have to serve an exemption claim form on the plaintiffs attorney and then get a court hearing within 7 days. At that hearing you are supposed to get a decision within 5 days.

So under the law you would have your frozen bank account resolved with 12 days which is pretty reasonable. However, the court dockets are simply way too overloaded for the law to be practical. I once saw the decision in 5 days state "This matter has been adjounred 30 days for control purposes." The judge satisfied the statute by getting a decision out in 5 days but it really was not in the spirit of the law of settling these disputes quickly.

[rd1210]

I am current with the credit card payments now, but as of Jan 2011 I wont be able to pay them. I hope that I settle the social security disability and workers compensation within 12 to 18 months. Like I said I own a house and have to pay the mortgage so if my checking account where my disability pension and worker comp check get deposited gets frozen I wont be able to pay the mortgage . Does it take weeks or months before they start freezing accounts and taking you to court? I keep reading about charge offs and collection agency and 180 days. I am not worried about the phone calls or my credit report right now, the credit report can be repaired later.

Thank You RD

[skippy1960]

My personal experience is as follows-

From date of first default or missed payment, it took a minimum of 9 mothns to see the first lawsuit and this was on the big balance cards over $10K.

6 months of missed payments to OC, then charge off.

Smaller balance accounts place with Collection Agencies, get notices and send Debt Validation letters disputing, most sold to the next collector.

Large balances law suit filed as fast as 9 months others around 12 months. You need to remember once you decide to fight them in court or arb it takes even longer. Chase for +12K 180 days late in December 2008, filed suit in May 2009, just conclude trial in October 2010.

The primary factor on when they can come after your funds is winning judgement. So you have a good long time to begin researching how to respond to all of this as your first missed payment is Jan 2011.

[WhoCares1000]

I would say it depends on how much you owe and who you owe. Some banks are faster than others in going to the courts. Generally though, no one will sue you for the first 6 months after the first date of default. They will call and say all sorts of things to get you to pay.

After 6 months, the charge off happens and many either sue at the drop of a bucket or sell off the debt to collectors who get more and more threatening. If the debt is less than $1k, sometimes then never get around to suing you at all (I have seen this in New York State). After that, the time of suit can be between 9 months and 18 months.

I suggest you learn about the FCRA and FDCPA as well as any NY Consumer Protection laws and use those to your advantage. Also get call ID for your phone and do not answer any number you do not know. Also learn how the court process works in case it gets that far.

When you get your settlement, you can in turn settle the debts one by one. In many case, they will take pennies on the dollar, especially if you tell them that your only income is exempt from lawsuit. It will hurt you that you own a house but too late now. Make sure to get any settlements in writing before you send them a dime. You know a credit card collector is lying if their lips are moving.

Another thing you may want to do is start to move to either money order setup for payments (unbank yourself) or make sure your account has only exempt funds and that it is always under $1700. This way, the only thing they can try to get is the house which may not have enough equity to bother.

Finally, whatever you do, take care of the 4 walls first. That is food, utilities, housing, and transportation. If you have extra after that, try a pro-rata plan for a while. This is where you take what is left and pro-rate it to each creditor and send it in. The small payments screws up the computers at the bank. You will not be able to hold them off forever but I have heard of people not being sued for 2 years doing that. If you do not have anything left, you do not have anything left. That is the risk the bank took when they extended to you unsecured credit and they knew they were taking that risk when they did it.

[Guest usctrojanalum]

Another thing you may want to do is start to move to either money order setup for payments (unbank yourself) or make sure your account has only exempt funds and that it is always under $1700.

The bolded is a great piece of advice. So long as you keep less than $1700 in your account it will not be frozen. It's called the Exempt Income Protection Act, would be good if they made it a Federal, I think everyone would like a $1,700 exemption.

[Templar]

Just checked in, saw this thread from a neighbor. There's a qualification to USC's entry. Under EIPA, your bank account cannot be frozen if the balance is less than:

* $2,500 - if your account contains directly deposited exempt benefits, including Social Security, SSI, Veterans benefits, disability, pensions, child support, spousal maintenance, workers compensation, unemployment insurance, Public Assistance, Railroad Retirement benefits, and Black Lung benefits;

or:

*

$1,740 - all other accounts.

[Guest usctrojanalum]

Just checked in, saw this thread from a neighbor. There's a qualification to USC's entry. Under EIPA, your bank account cannot be frozen if the balance is less than:

* $2,500 - if your account contains directly deposited exempt benefits, including Social Security, SSI, Veterans benefits, disability, pensions, child support, spousal maintenance, workers compensation, unemployment insurance, Public Assistance, Railroad Retirement benefits, and Black Lung benefits;

or:

*

$1,740 - all other accounts.

The $2,500 only applies to accounts that are joint with those benefits directly deposited into them.

[Templar]

Maybe, but I don't think so, nor do the Courts.

Edited December 21, 2010 by Templar

[Guest usctrojanalum]

Courts rarely get involved with these type of things. I asked my buddy who is a law clerk in Suffolk County how many motions to object to a exemption claim form he received this year and he said two that needed to be decided (said there were some others but they were settled before the return date). His docket has had over 30k index numbers purchased.

[Templar]

USC,

Don't know where you're going with this. Go on line. Read the Law. That's where you'll find the last word. Attention to Detail.

Banks and Courts being creative, imaginative reading laws passed by a legislature and signed by a governor go where angels fear to tread. It's opening themselves up for review by oversight agencies. Courts especially don't want to open themselves up to an Office of Court Administration investigation that's a key stroke away.

[Guest usctrojanalum]

USC,

Don't know where you're going with this.

Just pointing out you can't make broad sweeping generalizations like "so do the Courts" when in actuality you honestly have no idea what you are even talking about. How things work in theory is almost never how they work in practice.

Edited December 21, 2010 by usctrojanalum

[Templar]

Well, I suppose you must be very learned and experienced in the legal world, and gifted. I can't seem to find time to generate as many posts as you've put out within such a short time period. I can't/couldn't do it...and with me being semi-retired at that.

I yield to you and your skills.

The OP certainly needs aid and comfort. Please do the person right.

[Guest lguerin]

Templar. you are right. He may be a process server, but nowhere in the law does it state that the $2500 exemption has to be a joint account. This is part of a quote from a Legal Service Website. I can't post the URL as I don't have enough posts.

"New York's Exempt Income Protection Act (EIPA) eliminates the conflict between New York's debt-collection procedures and federal and state exemption laws. The EIPA, effective Jan. 1, 2009, automatically exempts the first $1,716 of any bank account from debt collection. And if the account receives any statutorily exempt, electronic payment, such as Social Security, the exemption floor is set higher at $2,500. "

[Namvet65]

Hmmm...I thought the Social Security Act automatically exempted all income from social security and disability.

The op should research NY bankruptcy laws and determine all exemptions, both personal and homestead. The NY homestead laws may help protect his home, or at least notable equity in his home.

[chiquita55]

Disability won't be a defense to any of these bills but no one can garnish your disability checks. If you plan to wheel and deal with them at some point I would call them and tell them your problems and see if you can pay less (if that is an option for you). Tell them you can only pay $25 or something a month. See if they will help you. The only problem with stopping payment is your bills will end up humongous with interest rates skyrocketing and penalties. But if there is nothing you can do then thats the way it is. Nothing will happen to you immediately. Same thing happened to me and only 1 of them has sued that I am dealing with now. I have nothing for them to get. I would try not to fret about it too much unless you have assets you can lose.

[debtfighter]

Although I do not have the link, I recently read an article that talked about the bigger banks being more willing to work out the credit cards debts, especially, where there is a hardship. It had a lot to do with the BK changes of 2005, that actually hurt the credit card companies ability to collect in BK. Instead of losing it all or having to write it off, many card companies were removing late fees and lowering interest rates in efforts to make the debtor able to make some type of minimum payment. If I find the link I will post it.