Q. I divorced in 2021 and all the debt was in my name and my ex-wife did not have to take on the marital debt. I continued to pay on my credit cards, but not on the ones she used, as I hoped she would have to take on this debt. It’s now $33,000 and it’s affecting my credit. A few are in collection, but all are invoiced. Recently, a debt consolidation company approached me to try to arrange a debt resolution fixed repayment plan. The statute of limitations for most of these cards is two years. What should I do next?
— Debtor
A. We are sorry to hear that you have this debt and it is now affecting your credit report.
Let’s move on to your options.
First, the statute of limitations begins when the last payment has been made, said Union City bankruptcy attorney Karra Kingston.
However, if you make a payment to the debt settlement company, it will restart the statute of limitations, she said.
“It’s important to note that debt settlement companies aren’t always the right solution,” she said. “If you have large debts and don’t have the money to pay creditors, it’s best to speak to a bankruptcy attorney who handles both settlements and bankruptcy so they can can give you a full picture of your options.”
Typically, if you do nothing, it takes seven years for late payments to disappear from your credit report, Kingston said, but sometimes it takes longer when the debts are liquidated and the new creditor can start paying. report these late payments.
But, creditors can start suing you and get a judgment against you if the statute of limitations has not expired.
A judgment means they can garnish your wages, take your bank accounts and put liens on any personal property, she said.
Kingston said there can be downsides to participating in a program with a debt settlement company and not everyone is a good candidate.
“Debt settlement only works for people who have the money to make payments,” she said. “A lot of people end up being sued because they can’t find the money to settle the debts.”
For example, she said, if someone owes Citibank, Discover and Chase but only has the money to settle with one creditor, other creditors can sue them.
Then, she says, debt settlement companies aren’t able to settle all debts, and there are times when creditors don’t work with the settlement company.
Also, be aware that when debts are settled, it may mean a tax bill.
You will receive a 1099-C for any canceled debt over $500, he said. This means that you could have tax consequences at the end of the year.
“For example, if a person owes $10,000 and the creditor and debtor settle for $6,000, the debtor may have tax consequences on the forgiven amount of $4,000,” he said. she declared.
Talk to professionals who can review the details of your debt and financial situation to help you choose the right path for you.
Send your questions to [email protected].
Karin Price Mueller writes the Bamboos column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. To find NJMoneyHelp on Facebook. Register for NJMoneyHelp.comit is weekly e-newsletter.
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