I’m disabled and have been receiving Social Security disability benefits for many years. In 2015, my daughter fell seriously ill and was unable to support herself for nearly two years. I had to cover her expenses with my limited SSA benefits, which led me to max out my credit cards to make ends meet. Eventually, I could no longer make even the minimum payments and stopped paying altogether.
As a result, Discover Bank and Portfolio Recovery Associates sued me. At that time, I was dealing with a lot and didn’t respond to the lawsuits. Since my SSA income was protected and I didn’t own anything of value, I chose to ignore the situation, resulting in default judgments against me.
I now owe $1,500 to Discover and $4,000 to Portfolio Recovery, and I want to resolve these debts. Bankruptcy is not an option for me, so I’m thinking about contacting each creditor to offer lump sum payments to settle the judgments. I have a few questions:
- What’s the best way to contact these creditors?
- How much should I offer as a lump sum payment? I’m not well off, so I need to offer an amount that’s reasonable but not too low.
- I understand that I need to get everything in writing, including the creditors’ agreement to file satisfaction of judgment with the court once they’re paid.
Is there anything else I should consider?
I would greatly appreciate any advice.
Why give them anything if you have no assets and they are unable to collect your Social Security income? It seems like a waste of your limited resources, unless you are trying to repair credit, as they have no way of collecting. Companies typically want between 50% and 70% of the total amount if you are determined to try to pay them. This isn’t a good choice if you don’t have a lot.
I recently learned that these creditors can seize the settlement I obtained after being hurt in a car accident, which I used to purchase a brand-new car. I can’t misplace my car. It must last me the remainder of my days. I will never have the money to buy another car.
Make a payment plan arrangement with your creditors over the phone or file for bankruptcy if you fear losing your car. If you choose to ignore them, you might discover one morning when you go outside that your car has been towed and that you will not be able to get it back.
I concur. You should move on if you are unable to file for bankruptcy or choose not to, as that is your right.
I’m a lawyer (but not your lawyer). The advice you need can vary depending on the state you’re in. Be very cautious with your assets and how they’re titled. If you’re in a state that protects personal injury settlements from creditors, but you have a bank account where you mix those funds with other non-exempt money, a creditor might be able to garnish that account. It’s better to keep your personal injury funds in a separate trust, which could then loan you money to buy the car and place a lien on the car. This setup makes it harder for creditors to claim the vehicle.
Ideally, you should have resolved the judgments when you were still dealing with your injury claim, before receiving the settlement money. For instance, when one of my clients received a $400,000 workers’ compensation settlement, she had a separate bank account specifically titled for settlement proceeds. This account only had the settlement funds deposited and then used for expenses, making it clear to any creditors that these were protected funds.
Protecting a large settlement from both existing and potential future creditors is crucial. Settling with creditors before they obtain a judgment is usually easier and less costly. If you reach out to your creditors now, they might conduct an asset search. It’s wise to title your assets properly and explore protection options (like trusts) before negotiating settlements with judgment creditors. Your SSI should be safe as long as it’s not mixed with other funds. The protection of your settlement will depend on your state laws.
Avoid discussing your settlement with creditors. If they demand full payment and your assets are protected, simply explain that you can’t afford the full amount and thank them for their time. Settle for a lump-sum payment rather than a payment plan. When you’re ready to settle, contact the law firm that sued you to ensure they file a satisfaction of judgment with the court.
Thank you for your time I really appreciate it.
I’m in Michigan, and my settlement was around $30,000, which I used to buy my vehicle. The other driver was completely at fault.
In Michigan, I can keep up to twice my monthly SSA income in my bank account without risking garnishment. Since I receive $1,200 per month in SSDI, I can have up to $2,400 in my account. Right now, I have about $5,800 in the bank because I budget carefully to save for future expenses like car insurance and maintenance. This leaves me with an extra $3,400. What should I do with this extra amount?
Do you think Portfolio Recovery Associates (PRA) would bother seizing my vehicle if I only owe $4,000?
Michigan has strong legal aid resources. Michigan Legal Aid provides useful information on how creditors can garnish wages, bank accounts, and other actions they might take to collect debts. They also cover additional protections for married couples when only one spouse is responsible for the debt. Their website is a great starting point for understanding Michigan law. Here’s the link: Michigan Legal Help.
For secured creditors like car lenders, they can repossess the vehicle if you default. However, Discover and Portfolio Recovery Associates did not provide the car loan, so they cannot repossess it. If they wanted to pursue your vehicle, they would first need to file a lien. You would then need to address that lien. Avoid mentioning the car to your creditors. While they might find it through an asset search, you could remain under the radar.