Wednesday, August 14, 2013
April 18, 2013 - Todd Ossenfort: Sometimes poor investment strategies can lead to significant capital loss and even debt. Learn from Todd Ossenfort, The Credit Guy, on what to do when you've made a credit mistake.
April 18, 2013 – Mr. Ossenfort, a few years ago I invested thirteen thousand dollars into Alien Trust, which was an Internet scam. To get the money I got cash advances from credit cards. Now I’m stuck living with my in-laws and am tired of living here. I couldn’t afford the interest rate so they put all of my debt in their names. My question is if I get the debt put back in my name and quit paying it, will I have bad credit for the rest of my life? Or what will happen if I file bankruptcy?
Todd Ossenfort's Solution:
Luckily, we all have the opportunity to learn from our mistakes and move on, hopefully away from your in-laws, smarter and more prepared for the next time. In fact, bankruptcy is an option in this country for that very reason. Unfortunately, it is not as easy to qualify for a clean slate bankruptcy (Chapter 7 where most of your debts are completely forgiven) as it once was. On the fortunate side, you will not have bad credit for life, no matter what. Bankruptcies stay on your credit report for 10 years, but most negative items are removed after seven.
Transferring the debt back into your name and not paying is a bad idea. I know you want out from under the debt - for no other reason than it reminds you of your bad investment - however, you did take out the cash and you do owe the creditor.
My recommendation is to leave things as they are and pay off the balances as quickly as possible. Since you are experiencing some difficulties living with your in-laws, why not get a second job. It will accomplish two things, you’ll be out of the house more often and it will give you additional income to pay the debt off faster.
If you do decide to put the balances back into your name and stop paying, your creditors will eventually - usually 180 days after your first missed payment - charge off the balances as bad debt. Your balances will then likely be sold to collectors who will attempt to collect the debt. This is the beginning of a bad thing.
Because you owe a significant amount of money, the collector(s) will likely take the case to court if they are unsuccessful in collecting the debt. The court could award the collector a judgment, which can be used to garnish wages and place liens on property depending on the laws in your state.
Your in-laws may not be perfect, but I’d be willing to bet they are better than dealing with collectors.
Filing bankruptcy is an option that you could pursue, but I’d encourage you to visit with a reputable credit counseling agency before you seek the help of a bankruptcy attorney. You will have to attend a credit counseling briefing as a requirement to file for bankruptcy, so go ahead and make an appointment and see what your options are. A certified credit counselor will review your financial situation and offer a number of solutions that will work you.
Take care of your credit!