Don't make let collectors pressure you into bad decisions about debt

When you are in financial trouble, take a deep breath and step back and think about your overall situation.

I often meet with people who have let "important debt" go unpaid because of pressure from collectors.  What is "important debt"?  It is debt which can hurt you if you don't pay it.

If you don't pay your rent, your landlord can evict you.

If you don't pay your mortgage, your mortgage lender can foreclose on you and evict you.

(At present, there are rules about eviction and foreclosures, due to Covid, but eventually we will get back to normal).

If you don't pay your car loan, your car lender can repossess your car.

If you don't pay your utility company, it can turn off your heat or lights.  (And yes, there is the cold-weather rule, but spring eventually comes!)

So, these are important debts.

Debts that are much less important include credit cards.

The reason that these credit cards are less important is that they can do much less to you.  

Yes, they can sue you and get a perfectly valid judgment against you.  But what can they do with the judgment?  They can take your non-exempt assets.

Well, what are your non-exempt assets?  

Your home is protected, generally up to $420,000.00 of equity and 160 acres in size.

One car is protected, up to $5,000.00 of equity.

Your household goods and clothing are protected, up to about $11,000.00.

Your IRA is protected up to at least $75,000.00 (much, much more in bankruptcy).

Now, it is true that a creditor with a judgment can try to take a portion of your paycheck -- one-fourth or the amount over $403.20 per week, whichever is less for the creditor and more for you)  

But a credit card judgment cannot take your exempt home, your exempt car, your exempt household goods, your exempt IRA.

A collector may threaten suit, but threats don't mean that the suit will invariably happen.  And even when suit does happen, we have time to respond to the claim.  But if the collector can pressure you into not paying an important bill in order to avoid a suit that may never come, and if use the money to pay his credit card claim instead of an important bill, the collector may put you onto the slippery slope to losing your house.

Yes, it's good to keep a good credit score.  But it's better to have a place to live.

If you are having to choose which bills to pay, give me a call at 320-252-4473 to talk about some of your options.

Sam Calvert