Just Starting: Please help me make a plan on paying debt collecters.

[Focused]

Edit note: $4000 a month is a bit high, I am not sure how much tax the gov is gonna 'take'. A simple online calculator says my pay will be about $52k after all theft is endured. So more like 3100 a month in access of spending, or about 2100 the first month. :-(
Edit2: I have a hatchback averaging 36MPG , less then 150K miles on it and still reliable. Fully paid for.

* I recently graduated from college.
* I just got my first 'real job' offer  63,000 per year PRE-Tax.
* I am relocating to within walking distance. Housing = $600/month_$7200/year
* I pay car insurance now in one of the top 15 most expensive states $116/Month.
I am moving to a way more reasonable auto insurance state, I hope I can pay $600 up front for a year after the first month. I will shop for insurance after relocation.
* I have averaged less then $15000 a year of spending including bills, through my college year, so I assume I can continue the discipline and save a huge stash.
*Student loans total $7,505 current, not delinquent.
*$39.95 for 'unlimited' 20gb limit cell phone. I use less then 2GB of data. I want to switch this over to one of those ~$15/month payed once a year plans in the next couple months.
*3 consumer debt accounts in 'collections'.
$9,569 old CC and $585 old 'line of credit' with one collector. $3,688 old CC through a different one. (I think this one is the one they sued me over last year, but I had no job to pay anything. If not I have even more.) $13,842 maybe more. I got those 3 amounts via credit-karma. So I'm not sure if the $3688 is the one that won lawsuit or if that one is not showing up.
*If the garnishment level one is included, that is ONLY $21,347 worth of a face-punch! Not at all insurmountable. (Less then $30K in stupid) Not too bad for someone who has made less then $100K of income in entire life.
*I should be getting first paycheck before mid next month when my $80 minimum student payment is due. It is still accruing interest, so it seem logical that it should be payed down aggressively.
*But now that I have the ability to pay, the two collectors will want blood. How do I negotiate with them to lower the amount owed because I know they did not pay my actual creditors the full amount I owed to them. I assume I can get a better deal if I save the money first. I created a second free credit union checking account called bill-pay.
*I also want to save $7000 as quickly as possible in case I loose my job/ or am bad at my job, so I can spend $5000 on CDL school and have $2000 in backup for living on. I get my first performance review after the 3rd month of working. So I would like to have the $7000 saved by then in case I loose my job. I want a plan B just in case. The other case is that they love my performance and I get a nice comfy raise. :-)
*First month I plan to spend less then $1200 including moving expenses. I will come back next year for more of my ‘things’, I plan to bring only that which fits neatly in my car. I have a family member that lets me store my ‘things’ in their attic. I plan to leave my summer tires her ~1000 miles away, in hopes that I get a few days off to make the trip/visit family. I am getting my winter tires on today. Fresh oil change.
*after subtracting moving and first month expenses -1year car insurance premium and 1 year phone bill, that leaves me about $3000 to save/pay off debt the first month. About $4000 a month there after.
*That is correct. I plan to put 4/5ths 80% towards my financial goals. :-})   does this look like a Money Must-Stash smile?
* I plan to put the money for paying debt into my new bill-pay account. I plan to put the $7000 plan-B fund into Money Market/ savings account.
*I am budgeting for $1200 a month, but with very little driving and food ingredients for home cooking being my biggest spending item (I rarely eat out: a couple subs, a couple burgers, and a mothers day meal once a year), I likely will spend only ~$850 ($600 rent + $150 food, $100 gas/other.)

??? *Should I try to pay them in chunks? Should I save up $7000 and try to play them off each other on who gets the money first, and negotiate for biggest discount write-off? Should I put it all into interest bearing student loans the first two months and get that gone fast? How fast is the garnishing entitled account going to take to realize I have a job and start the blood sucking? How much are they able to suck a month? If I agree to pay it all at once, are they gonna cut me a discount deal? (They still will profit)

Any other advice?

[ATtiny85]

I don't have the experience or knowledge to help much, but I did want to simply say welcome to the group. There are folks here who will provide some great feedback.

[Fru-Gal]

Your debt situation is confusing. I assume you are in the US.

Is one debt able to garnish wages due to a judgment?

https://www.consumerfinance.gov/ask-cfpb/can-a-debt-collector-take-or-garnish-my-wages-or-benefits-en-1439/

If the other two are debts that are revolving credit, unsecured debt, then you likely do not have to pay them. Debt going into collections means the original debtor sold these debts off to a debt collector. Legally they cannot do anything to you other than bother you by mail and phone. If indeed it is unsecured debt (you provided no collateral, as in a credit card), they have no recourse. Eventually they will offer you a lower amount to pay, or, in 7 years, it will fall off your credit report.

Others can confirm but I highly recommend NOT consolidating unsecured debt into a student loan. That only means that now the debt will NEVER go away until paid. Student loans are the only kind of debt that cannot be discharged in bankruptcy.

On second reading perhaps you were asking if you should pay off the student loan. The good news is that’s a very small student loan.

Try to use math rather than emotion to solve these problems. That means, if the interest rate on the student loan is 8%, while the interest rate on the consumer debt is 29.99%, the higher interest rate gets paid down first. Also remember that if you have investments such as a broad index fund that earn more than the interest rate on your debt, you should prioritize saving/investing over paying down the debt aggressively.

And also remember that debt is a tool for leverage that you (like all of us) have used well at times and poorly at other times.

[iluvzbeach]

Based on my assumption that you are probably in your 20s, I would recommend you suck and up and pay off those old debts.  While they will eventually drop off your credit report, it will take 7 years for that to happen and even then it will take time for your credit score to climb again.  This is a timeframe when you'll likely be looking to begin using credit for things like a newer car, or to purchase a property to live in.  As such, it's a time where having good credit will be needed.  While it may hurt to pay off those old charged off debts, you incurred them and it's time for you to stand up and take responsibility for paying them as agreed.

[BECABECA]

If considering paying off the debts, first you need to know what the original amount was and the date of the last payment you made on it. That way you will be able to identify if it’s past the statute of limitations for your state (and the clock got reset each time you made a payment). And then you’ll also be able to know how far you should be able to negotiate the debt collectors down if you decide to pay it. If you do want to pay it off and it’s close to the statute of limitations, that can help you bargain to get it lowered to less than 50% of what they say you owe. If you bargained and got in writing that they will consider it paid in full, then paid that agreed upon amount, it would come off your credit report. But also it would come off your credit report after a certain number of years even left unpaid, typically 7.5 years from when it first became past due.

So, to get this info you start by asking the collector for written proof of your obligation, which by law they must provide (https://www.nolo.com/legal-encyclopedia/debt-collection-defense-requiring-that-the-collector-document-the-debt.html). If they can’t provide that, then legally you don’t owe them anything.

Next, this is a really good resource for walking you through what you should do each step:
https://www.debt.org/credit/collection-agencies/how-to-pay-debt-in-collections/#

[Focused]

ATtiny85: Thanks for the welcome.

Fru-Gal:
Yes, I am in the US, the debt was acquired in and before 2017. In 2017 I lost most of my income and decided to stop making payment. I never answered my phone if I did not know the person and never called the debt collectors back. 7 years later and wow has time flied, one of them has sued me, the other has not yet sued me. Both of those collectors are long past due. Yes the court told us that they could garnish my wages if needed to get it from me. (Not get it back, as I never made a contract with no collections org. ‘selling’ debt, should be fraud, just as buying customer accounts when a bank/company is sold should be.) But its a matter of what is, not what should be. But until now, I had no ‘wages’ to garnish.

My line of questioning is more in line of where do I put my money first and how do I pay the least amount total. I think as the two big debt are owned by collections company's it should be possible to negotiate a lower payback total if I incentivize them with a quicker lump sum payback. Maybe I save up my $7000 plan B and pay back my $7505 in student loans first. The reasons for paying back the student loans first making sense: The collections should not be incurring interest. While the student debt is getting bigger. Also, if things go way bad this winter, I can not file bankruptcy on student loan, it would be wise to get it gone ASAP. It is in good standing, so if I pay it off, or keep paying it down slower it will look good on my credit as well. Not sure if paying off the old 6-7 year old debt to a collector is going to help my credit. But I might as well as its only ~$14K.

recommend NOT consolidating unsecured debt into a student loan.

I agree: That would be super dumb. No reason to. I will be debt free before next year if I am able to keep my new job. Totally debt free. No student loans, lawsuit leaches, or ‘collectors’. All I had was the more recent small student loan, and the older unsecured consumer sucker debt.

Try to use math rather than emotion to solve these problems.

Yup, INT[J/P] here. Logic rules supreme. My understanding is that debt collectors cannot charge interest? So the student loan should be prioritized, unless paying the other debts sooner gets me a bigger discount. But it should not matter much, I will have it all payed off and have my e-fund 10 months. I just need to decide on the order in which to pay, and how to get the biggest collections discount.

Iluvzbeach:
I am ~30.

This is a time-frame when you'll likely be looking to begin using credit for things like a newer car, or to purchase a property to live in.

Absolutely not! I will drive my current car into the dirt even if if I have a million in Vanguard. I hope to double the current miles and then some before the engine goes. Then maybe a rebuild or car upgrade evaluation will be in order. I spray the under side with a rust prohibitive every year, so it should still be in good shape when the engine finally goes. I can hope. But I will never take on a car loan. House, I hope to save enough to buy a property cash outright if not maybe 40% down 5-15 year year mortgage. I also want to build a ‘house’ to my own specs, I think modern ‘stick frame’ houses are inefficient and built for short term thinking consumer-suckers. Steel reinforced concrete or better is the way to go. I do want to restore my credit though, not because I ever want more debt, but because its increasingly common that they use it for non-loan things. My insurance rate is higher due to my low ‘I love debt score’. I think in the future, they will turn you down for jobs for low credit too.

While it may hurt to pay off those old charged off debts

I plan to pay back all the debt in 2025. Its not a big deal, its not that much debt, and I would rather get rid of it even if it means paying a slime-bag debt collector. I would much rather pay back the bank in full then pay a slime-bag at 50%. But I don’t have that option. I want it all gone and be debt free 10 months from now!

Becabeca:

If considering paying off the debts, first you need to know what the original amount was and the date of the last payment you made on it.

:
Its about 7 years now. But in my current state, the terrible one I am moving from. They can sue you, and keep claiming you owe: Forever. So long as they do it before the end of the 7 years, I think thats how it works. Not sure if that would not apply after I move to the much better state. (Lower/No State income tax too) But I still think paying it off is a good idea.

negotiate the debt collectors down if you decide to pay it

A lot more as it is in the 6th/7th year? Think the 10K debt could be dropped to 4k if I offer them a lump sum?

So, to get this info you start by asking the collector for written proof of your obligation, which by law they must provide (https://www.nolo.com/legal-encyclopedia/debt-collection-defense-requiring-that-the-collector-document-the-debt.html). If they can’t provide that, then legally you don’t owe them anything.

Next, this is a really good resource for walking you through what you should do each step:
https://www.debt.org/credit/collection-agencies/how-to-pay-debt-in-collections/#

Thank you, this looks like real good info.

Is there any of you that think I SHOULD, just ignore them and let it drop off the report and invest 70%-80% of my income. Can paying off the old debt add a “positive” comment on my reports?

[Fru-Gal]

Have you looked at your credit report to see what is currently being reported about these debts?

Paying off your debts that have gone to collections likely will not improve your credit.

The first priority might be the one with the legal judgment (if that’s what it is, and not merely a threat).

If the others are 7 years old they may be very close to being dropped off your credit report.

In my experience, yes you can negotiate these debts down by at least half.

[Focused]

So I went to ‘annual credit report’ for and checked it out.

Equifax:
Revoving Accounts:
Open = 0
Closed = No late payments, the one shows %[high] Utilization, so a smart banker will know something is up there. Nothing much to do about that at this point. All of them are over 4 years.
No Mortgage Accounts
Installment Accounts: Two student debts $4686 + $2819 = $7505
Other Accounts:
Collector #1 x2 accounts: Closed, Late= 0, Age 1yr 10mos
Collector #2: Closed, Late= 0, Age 5 yr 5mos
“You currently have no Consumer Statements on your credit file.”
Every month for Several months in a row “CAPITAL ONE BANK USA” Capital SCUM has been “PRM” my account without ever having consent. I don’t even know how they got my SSN, can I get them to stop? “Whats in my wallet?”: Cash. I would like capital one to stop contacting me and stop abusing me in any way, I have never had an account with them, and never want one.
“You currently have no bankruptcies on your credit file.”
“You currently have no Collections on your credit file.”

“A condition exists that prevents Experian from being able to accept your request at this time.

Trans-union asks me to verify code sent to my phone but never sends me the code!
“Oops, looks like you need to enter the pass-code. Please try again.” Oops its not our fualt; oh ‘there is not another cable company’
What a buggy piece of crap online software is these days. I remember in 2020/2021 I needed to go to the DMV, but my states website would not let me do what I needed to do and they would not let me come in to do it in person, and they forced me to not renew my tabs for close to a month before it started working again.

It looks like I just need to pay off the lawsuit people and my student loan. 10K closer to my goal?
Why did the one debt collector sue me but the other did not?

[Focused]

My student loan amount went up. $7,538.45
I think that maybe I should keep paying my car insurance 'month to month' until I get these loans all paid off. I will get it done sooner that way, then pay the insurance in full after I am free. I should be able to make a small payment on my loan and put the rest of the debt payment money into the lawsuit. Then payoff the student loans next. Then I can start investing after that. I do think I should put the 3-4% in 401k as that is a small amount, to get the free company match.

[kina]

Please forgive me in advance, but it's getting in the way of me caring.

You have debt, not dept.

[Focused]

Noted. I just edited all my posts. Thank you. I will have to mind my b's and p's.

[footwear]

didn't read the whole thread, apologies if this has already been said. if you pay off any collections or charge offs be sure they agree to delete the collection from your credit report.

[kina]

Noted. I just edited all my posts. Thank you. I will have to mind my b's and p's.

:D

[TMB]

If one has a judgment, then they are likely to want a higher percentage of the debt to settle, though even with a judgment, most debt collectors will negotiate as voluntary payments are easier for them.

You would have to look at your state's laws to determine what type of protections you have.  If I recall, Texas doesn't allow wage garnishment (which is unusual) but many states have some type of protections as to amounts.  However, with your income, I would be surprised if your whole income was protected from garnishment.  The collector will be less interested in settling for less than the judgment amount if they figure out you have a job where they can garnish your wages.  Many states provide that interest accrues on judgments.  Different states have different times that judgments last (including possibly forever).

For the debts that didn't result in a lawsuit, a lot depends on exactly who's collecting and how old the debt it.  As mentioned previously, each state will have a statute of limitations (time they have to sue).  If it is past that time then your leverage increases greatly.  Even if it is not past the SoL, the greater the time since you stopped paying, the more likely they are to accept a lower amount.  Even if they can't sue, at least in most states, they can still report it.  General rule is that negative information can be reported for 7.5 years.

Some debts are sold to new companies.  They have any right the original creditor would have had.  In some states a debt collector can be assigned a right to sue on behalf of creditors.  Just because the debt was charged off (which is just an accounting thing) does not mean you can't be sued if it wasn't secured debt.

Debt verification is....not impressive.  Some states have greater rights, but I believe the link provided was referring to the "validation" right found in the Fair Debt Collection Practices Act, 15 USC 1692.  Most courts don't require a debt collector to do much more than go back to the owner of the debt and ask them to pinky swear that the debt is owed.  Some states can provide for a request for at least some documents supporting their claim of the debt amount.

[Simpli-Fi]

I just dumped your post into ChatGPT for fun.

Congrats on your new job and careful planning! Here's how you might approach your situation:

### Debt Repayment Strategy
1. **Prioritize High-Interest Debt**: Start by tackling your consumer debts, as these are likely accumulating more interest than your student loans. The $7,505 student loan debt, especially if it has lower interest rates, may not need to be your first priority, but do make sure to keep up with the minimum payments to avoid delinquency.
   
2. **Debt Settlement Negotiation**:
   - **Save Before Negotiating**: It’s often best to save up a lump sum before negotiating with collectors, as they may agree to settle for a reduced amount if you can offer a one-time payment. Collection agencies typically pay less than what you originally owed, so they may accept a percentage to close the account.
   - **Target One at a Time**: Once you have savings built up, reach out to the debt collectors and offer a settlement, starting with the one with the largest amount or highest interest. You can use the fact that you have other collectors to deal with as leverage to push for a bigger discount. It’s not uncommon to get 50% or more off, especially for older debts.
   
3. **Verify the Garnishment**:
   - If one debt has a judgment against you, garnishment can happen quickly after you get a paycheck. Contact the court or review any paperwork you’ve received to confirm the status of the garnishment. Depending on the state, they can take a portion of your disposable income (up to 25% of your wages in some cases).
   - **Negotiate Post-Garnishment**: If they’ve already begun garnishment, you can still try to negotiate a lump sum to settle the debt and stop the garnishment. Collectors may be more willing to cut a deal if they see they’ll get their money faster.

4. **Balance Debt Payment and Savings**:
   - **Save While Paying**: Your plan to save $7,000 as a safety net is sound, especially since you’re considering a CDL school as a backup plan. Allocate some of your monthly surplus towards savings while negotiating with collectors. If you lose your job or face garnishment, having cash on hand gives you leverage and security.

5. **Budget Flexibility**:
   - Your plan to live on $850/month is aggressive, but if you’ve lived on less in college, it’s doable. Keep track of any unexpected costs that could arise, and make adjustments where needed.
   - Consider setting up automatic transfers to both your bill-pay account for debt repayment and your savings to ensure you stay on track.

### Actionable Plan
- **First 2 Months**: Focus on saving the $7,000 emergency fund while maintaining minimum payments on student loans and any debt not in collections. Use any leftover funds to negotiate with collectors.
 
- **Month 3 Onwards**: After securing your emergency fund, shift to debt repayment, starting with negotiations for lump-sum settlements.

### Questions to Clarify:
- **Should I pay in chunks or wait for lump-sum deals?**: In most cases, lump-sum payments yield bigger discounts. If you can save for a few months and negotiate, you’ll likely get a better deal. If you must start with small payments, always ask for a written agreement on any reduced payment plan or settlement.

- **Student Loans vs. Debt Collectors**: Since the student loans are manageable and not yet delinquent, prioritize debt in collections first, especially the one with a garnishment risk.

- **Garnishment Speed**: Once the garnishment is in place, it could start quickly after your employer is notified. However, the process can take weeks or even a month depending on the state. Be proactive and check the status of any judgment to avoid surprises.

By sticking to your budget and aggressively saving, you should be in a strong position to both pay off your debts and secure a financial safety net.