What to do When you can't afford to pay collections?

This message was edited 1 time. Last update was at 11/04/2009

I have some old debts that are in collections and they've even sent me offers to settle for less and I've met with a local financial advisor who wanted to put me on a settlement program. Sounds great! Only problem is I'm a stay at home mom and cannot afford these extra payments. We're already on a tight budget with daily expenses. Everyday I feel "sick" thinking about this and that I'm not able to do anything. What are the long term effects? And are there any other options? I currently do not use credit cards and haven't applied for new credit since 2006, are there ways to still make my credit look "ok" while having bad debt?

This message was edited 1 time. Last update was at 11/04/2009

If you truly cannot afford to settle these debts then you have a couple of options:

1. Don't pay, and wait until you can save up enough money to settle. You potentially risk being sued for debts, depending on the amount and the creditor's policies.

2. Consult a bankruptcy attorney. While bankruptcy may not be your first choice, it sounds like you could really use that kind of advice. The consultation will be free and confidential, and you can find out what your options are if it turns out you cannot afford to settle.

I understand your concern over your credit scores, but your focus right now should be on handling this debt. Once that's stabilized, come back and we'll be happy to point you to our free resources for getting your credit back on track.

And if you would like more feedback on the settlement option, please elaborate a little more on your situation. What kind of financial advisor did you meet with? What kind of settlement program were they proposing? (I am not sure why you have to hire an advisor if you are already getting offers to settle, but I may be missing something.) How much do you owe?

This message was edited 1 time. Last update was at 11/16/2009

From experience my suggestion is to make sure that you are maintaining your current debts, especially if your funds are limited. Prevent any other accounts going to collections. Unfortunately they may sue you, but I don't know of anyone that has gone to jail for not paying their credit cards. Depending on the state you live in they can request wage garnishment, or you can find yourself in civil, small claims court. In that case, you will be given the opportunity to make a payment arrangement with them, but it will be signed by a judge and now you'll be in contempt if you don't pay.