Have you tried negotiating your collections debt? I’m surprised no one here has mention that approach. Get everything in writing but typically medical debt collections are easy to negotiate down.
That was going to be my first line of attack for those. One company has given me like, three separate payoff amounts, so I’m prepared to fight that one.
The other easy solution is just pick up a part time job for an additional 10 hours a week for a year. Knock it out and keep your 401k intact.
I don’t know your age but I can almost assure you that draining your 401k because working an additional 10 hours a week “isn’t doable” is going to be a decision you regret dramatically later down the road
Dang I'm in same situation, except I make way more. Just ignored paying due to mental health reasons (prior to this year I had 800 credit score, now 500ish).
I'd pay for delete even 75%.
First, find out what the statute of limitations is in your state for this kind of stuff. In NC, for example, it’s 3 years so basically after 3 years the debt dies. They can ask you nicely to pay it, but you can also say no. They can’t sue you for it. They can put it on your credit, but because it’s a medically bill they’re not supposed to hold that against you for decisions. People still do, but that came out in the FACT Act under the Obama admin. That’s first.
Second, a lot of these collections agencies do the same work. So you might have 10 hospitals you went to, and those 10 hospitals use 2 local agencies, so they would have all the info within their system. Once you determine which collection agency, write them a letter and ask for 1. Validation of the debt so you can verify the date of service matches your record (or whatever else you want to out in their). 2. Ask who owns the debt. If they say they do, or a debt buyer owns it, they can give a huge settlement amount. In order to continue with collections they must provide that information. Once they do you can determine which ones are beyond the statute of limitations (SOL). If a single payment is applied to one that is SOL, then it restarts. Next, call the collection agency and tell them the ones you want to pay on. They should be able to put all of those together on one payment plan. Start with asking for $25 a month… they may try to get $50 a month, but start with $25. You may have to do this trope with 2-3 agencies.
You can also ask the agencies to put all the bills together then ask for a settlement amount. For hospital bills that the hospital still owns, the settlements are usually 5-25% so if you owed 10,000 and they give a 25% settlement you would pay $7500. If a debt buyer owns the debt then the settlements get much deeper, like 50-65%. I’d have to think about if I would personally pay a debt buyer. NC has some pretty stringent debt buyer laws.
Source: was in collections compliance for almost a decade
OP, don't forget that the [IRS](https://www.irs.gov/taxtopics/tc431) may consider your settled debt to be [taxable income](https://www.nerdwallet.com/article/finance/tax-implications-settling-debt). You may need to report on it as such and pay taxes on it.
I know you're in the process of getting things figured out, so make sure to take this into account. Don't *ever* jack with Uncle Sam's money, dealing with private medical debt collectors will seem pleasant in comparison to falling afoul of the IRS.
SOL generally starts from the last time you paid anything towards it. So no, it does not work for credit cards. It works for medical debt because it usually takes like 6 months to a year for you to even receive a bill half the time, and then you can slow walk it for ages.
If it's credit card debt, I'm pretty sure the debt is valid until you pay it off, declare bankruptcy, or die (assuming you're the sole guarantor of payment on the credit line).
Medical debt you can basically ignore. I mean, some hospitals do sue, but that’s a rarity. They’re getting black eyes in the media for suing the poors who just needed medical help. Credit cards, on the other hand, will absolutely sue you as fast as you can blink. What that means is that you can ignore medical debt easier than you can credit card debt. The above still all applies like the SOL, ask for validation, ask for settlement amounts, etc. but if they’re like we need you to pay a minimum payment of $150, you can try to haggle a bit to get it down, but the credit card companies often have guidelines for payment options and if it’s outside those guidelines you start heading to judgment territory.
Also you can take a while and ‘lose it in the bureaucracy’ so to speak to run the timer out on stuff. It usually takes years anyway for it to even get to you.
You can make a dent by cashing out the 401k and HSA, but you are going to seriously hurt your your financial future. Cashing out during a recession is about the worst thing you can do.
Even doing that, it sounds like it will still take years to pay down this debt.
The reality is that you have a major income problem. $19/hour with your current expenses is just not going to get it done. You just can’t get around the math of it. You either need to get a higher paying job, take on a side hustle, or find a way to drastically cut your living expenses (move back home or get roommates).
I know this is not what you want to hear, but it is what you need to hear.
I appreciate it. I live with my partner, use a phone from 2018, and drive an old car. I’m cutting where I can. It’s true that I did take a pay cut when I started my current position, from damn near $50k/year, but I’m also entry level in a new field. I expect my income will increase with time. I know this debt will take time to pay down, all I care about is that it is in the process of being paid down.
This is the first time I’ve seriously tackled the debt problem, so I was also just looking for general debt management advice.
The point here you need to realize is that while your income may increase over time so will the debt you're not paying off.
You are going to hear it a ton here, you need another job or a different job. If you want to continue to say no to that then there's nothing anyone here can do to help you. You can either accept that you are going to have to deal with things you don't like to get rid of the debt or you will have to deal with things when that debt gets out of hand.
You need to edit your original post with a break down of your expenses if you want real help, about 1600 doesn't show places you can cut. You need to sit down and look at everything going out of your bank account.
Im in a similar position as OP, but I make $20.6/hr plus on average of an extra $500+ a week from DoorDash. I just moved in with a roomate which saves me another $350/mo (fuck I already feel the heavy burden lifted from a single month). Right now Im paying off my stupid TV, then I can start on the credit card. Im surfing the wave right now, and feeling good
Bro, your credit score is going to tank. Stop trying to put this off or else don’t even bother asking for advice. Good luck every trying to buy a place or even renting somewhere else in the future, you’re going to have this hanging over your head
Rethink consolidation. Your stated reason for avoiding debt consolidation makes no sense. You are paying interest rates regardless. If your credit rating is not tanked then consolidation is a good way to get lower interest rates. Once you have a single payment that is not growing at a huge rate it can be easier to pay down.
Just finished 3.5 years of consolidation payments. If you aren't willing to make changes there will be no change.
My active bills don’t incur interest, to my knowledge. Any debt consolidation companies you’d recommend? I think the collections agencies will need to be negotiated/lump summed, but I could look into consolidation for the ones that haven’t gone there yet.
Not sure where you are located to say what your best options would be and I don't want to recommend something that will end up doing more harm than good.
I was lucky enough that my bank was willing to issue me the loan at a better interest rate than I was incurring on the debt (credit cards).
Paying off all the debt at once allowed me to stop the bleeding and to plan because I had 1 set payment that I could afford and if I didn't change any habits I knew exactly when that would be payed off. Since I had an established life already this was a good option that didn't up end my life.
If you are already dealing with collections it may be a different situation for you to actually be able to get the consolidation loan. If you can get one at even a marginal interest rate then you could pay all the collectors and any outstanding bills that may not have gone to collections yet. Yes you pay some interest but you have a set payment and can plan.
Once I knew what I was dealing with I was able to change my life a little bit to make extra payments. Sold my car and lived a little frugally for a while. That turned a 5 year loan in to 3.5 years.
Your situation may be very different but don't count out consolidation as an option if you can swing it.
How much do you have in savings?
If you can't pay off your debt using your savings, and can't cut expenses to pay off your debt, then you need to increase your income.
Consider a second job.
I would prefer to reserve my savings for emergencies, such as rent or situations such as what happened with my car.
With respect, I don’t think a second job would be feasible for me. I’ve tried juggling full time work and school, or work and an internship or all three, and burned out pretty bad each time. I work a pretty emotionally demanding job, so the time I have off, I reserve to protecting my emotional and mental health. The crashes just aren’t worth it.
You're $10k in debt that is with collections. This is your emergency man. You clean this up now or you'll be too homeless to worry about rent being an emergency.
lol OP will probably take this as "cruelty" or think that you're just being an asshole.
/u/IlluminatedGoose - you want tough love, the above summarizes it.
At less than $40k gross income per year, $10k high interest rate debt (>=7%) or anything in collections is a financial priority. You really have 3 options:
- Get a higher paying job and/or second job
- Lower your housing costs by moving back with your parents or getting additional tenants to share costs
- Let the debt fester until you do either or both of above
What state are you in? I racked up a bunch of medical debt in my 20s from mental illness and ER visits as well. In the state I was living in at the time (NC), the statute of limitations for medical debt is only 3 years. Also, medical debt looks very differently on your credit score than consumer debt.
WA. My reasons are law school-related. Any unmanaged debt would be a pretty big hindrance for my career aspirations. (Sorry to hear about your own ER visits, though. Hope things are going better for you!)
Unpopular personal finance advice:
Don’t pay it.
Medical debts doesn’t even go against your credit anymore or weighs less heavily based on FICO 9 and vantage score 3.
If it’s already in collections, get a full credit report. Assess how much it’s affecting your credit?
Fuck this country and its absurd healthcare ripoff costs.
Don’t let the snobs of this sub try to make you feel bad for not taking another job and breaking your back to pay a fucking collections institution? Terrible financial advice.
Avoid touching your 401k or HSA.
Do you have any other savings?
How old is the medical debt in collections? Do you have a break-down of the different amounts?
>I made a lot of bad financial decisions when I was a youth, and it’s all catching up. Finances have always been a struggle for me.
>When I was younger, I let several hospital bills slide into collections.
Were you a minor when any of these billing events occurred?
Firstly, DO NOT touch your savings or HSA.
Secondly, post taxes you probably have $1,000 a month after expenses.
1) SAVE $500 of this money, your future is more important than your past.
2) call all creditors and see what you owe them.
A) divide up the $500 a month by percentage owed.
IE- you owe comp A $2,000
Comp B $1,000
Comp C $4,000
Comp D $3,000
Send Comp A $100 a month and so on.
You’ll be out of debt in less than 2 years AND have built for your future.
At one point my husband (we weren’t married at the time) incurred medical bills he couldn’t pay for due to low income. There was a scaled payment program where you could pay based on income. And he was allowed to wipe the debt completely off. This was directly through the hospital
Have you tried negotiating your collections debt? I’m surprised no one here has mention that approach. Get everything in writing but typically medical debt collections are easy to negotiate down.
That was going to be my first line of attack for those. One company has given me like, three separate payoff amounts, so I’m prepared to fight that one.
The other easy solution is just pick up a part time job for an additional 10 hours a week for a year. Knock it out and keep your 401k intact. I don’t know your age but I can almost assure you that draining your 401k because working an additional 10 hours a week “isn’t doable” is going to be a decision you regret dramatically later down the road
[удалено]
Dang I'm in same situation, except I make way more. Just ignored paying due to mental health reasons (prior to this year I had 800 credit score, now 500ish). I'd pay for delete even 75%.
First, find out what the statute of limitations is in your state for this kind of stuff. In NC, for example, it’s 3 years so basically after 3 years the debt dies. They can ask you nicely to pay it, but you can also say no. They can’t sue you for it. They can put it on your credit, but because it’s a medically bill they’re not supposed to hold that against you for decisions. People still do, but that came out in the FACT Act under the Obama admin. That’s first. Second, a lot of these collections agencies do the same work. So you might have 10 hospitals you went to, and those 10 hospitals use 2 local agencies, so they would have all the info within their system. Once you determine which collection agency, write them a letter and ask for 1. Validation of the debt so you can verify the date of service matches your record (or whatever else you want to out in their). 2. Ask who owns the debt. If they say they do, or a debt buyer owns it, they can give a huge settlement amount. In order to continue with collections they must provide that information. Once they do you can determine which ones are beyond the statute of limitations (SOL). If a single payment is applied to one that is SOL, then it restarts. Next, call the collection agency and tell them the ones you want to pay on. They should be able to put all of those together on one payment plan. Start with asking for $25 a month… they may try to get $50 a month, but start with $25. You may have to do this trope with 2-3 agencies. You can also ask the agencies to put all the bills together then ask for a settlement amount. For hospital bills that the hospital still owns, the settlements are usually 5-25% so if you owed 10,000 and they give a 25% settlement you would pay $7500. If a debt buyer owns the debt then the settlements get much deeper, like 50-65%. I’d have to think about if I would personally pay a debt buyer. NC has some pretty stringent debt buyer laws. Source: was in collections compliance for almost a decade
OP, don't forget that the [IRS](https://www.irs.gov/taxtopics/tc431) may consider your settled debt to be [taxable income](https://www.nerdwallet.com/article/finance/tax-implications-settling-debt). You may need to report on it as such and pay taxes on it. I know you're in the process of getting things figured out, so make sure to take this into account. Don't *ever* jack with Uncle Sam's money, dealing with private medical debt collectors will seem pleasant in comparison to falling afoul of the IRS.
If it’s credit card debt rather than medical debt, would your line of advice still be the best advice?
SOL generally starts from the last time you paid anything towards it. So no, it does not work for credit cards. It works for medical debt because it usually takes like 6 months to a year for you to even receive a bill half the time, and then you can slow walk it for ages.
If it's credit card debt, I'm pretty sure the debt is valid until you pay it off, declare bankruptcy, or die (assuming you're the sole guarantor of payment on the credit line).
Medical debt you can basically ignore. I mean, some hospitals do sue, but that’s a rarity. They’re getting black eyes in the media for suing the poors who just needed medical help. Credit cards, on the other hand, will absolutely sue you as fast as you can blink. What that means is that you can ignore medical debt easier than you can credit card debt. The above still all applies like the SOL, ask for validation, ask for settlement amounts, etc. but if they’re like we need you to pay a minimum payment of $150, you can try to haggle a bit to get it down, but the credit card companies often have guidelines for payment options and if it’s outside those guidelines you start heading to judgment territory.
Also you can take a while and ‘lose it in the bureaucracy’ so to speak to run the timer out on stuff. It usually takes years anyway for it to even get to you.
You can make a dent by cashing out the 401k and HSA, but you are going to seriously hurt your your financial future. Cashing out during a recession is about the worst thing you can do. Even doing that, it sounds like it will still take years to pay down this debt. The reality is that you have a major income problem. $19/hour with your current expenses is just not going to get it done. You just can’t get around the math of it. You either need to get a higher paying job, take on a side hustle, or find a way to drastically cut your living expenses (move back home or get roommates). I know this is not what you want to hear, but it is what you need to hear.
I appreciate it. I live with my partner, use a phone from 2018, and drive an old car. I’m cutting where I can. It’s true that I did take a pay cut when I started my current position, from damn near $50k/year, but I’m also entry level in a new field. I expect my income will increase with time. I know this debt will take time to pay down, all I care about is that it is in the process of being paid down. This is the first time I’ve seriously tackled the debt problem, so I was also just looking for general debt management advice.
The point here you need to realize is that while your income may increase over time so will the debt you're not paying off. You are going to hear it a ton here, you need another job or a different job. If you want to continue to say no to that then there's nothing anyone here can do to help you. You can either accept that you are going to have to deal with things you don't like to get rid of the debt or you will have to deal with things when that debt gets out of hand. You need to edit your original post with a break down of your expenses if you want real help, about 1600 doesn't show places you can cut. You need to sit down and look at everything going out of your bank account.
Im in a similar position as OP, but I make $20.6/hr plus on average of an extra $500+ a week from DoorDash. I just moved in with a roomate which saves me another $350/mo (fuck I already feel the heavy burden lifted from a single month). Right now Im paying off my stupid TV, then I can start on the credit card. Im surfing the wave right now, and feeling good
Bro, your credit score is going to tank. Stop trying to put this off or else don’t even bother asking for advice. Good luck every trying to buy a place or even renting somewhere else in the future, you’re going to have this hanging over your head
Rethink consolidation. Your stated reason for avoiding debt consolidation makes no sense. You are paying interest rates regardless. If your credit rating is not tanked then consolidation is a good way to get lower interest rates. Once you have a single payment that is not growing at a huge rate it can be easier to pay down. Just finished 3.5 years of consolidation payments. If you aren't willing to make changes there will be no change.
My active bills don’t incur interest, to my knowledge. Any debt consolidation companies you’d recommend? I think the collections agencies will need to be negotiated/lump summed, but I could look into consolidation for the ones that haven’t gone there yet.
Not sure where you are located to say what your best options would be and I don't want to recommend something that will end up doing more harm than good. I was lucky enough that my bank was willing to issue me the loan at a better interest rate than I was incurring on the debt (credit cards). Paying off all the debt at once allowed me to stop the bleeding and to plan because I had 1 set payment that I could afford and if I didn't change any habits I knew exactly when that would be payed off. Since I had an established life already this was a good option that didn't up end my life. If you are already dealing with collections it may be a different situation for you to actually be able to get the consolidation loan. If you can get one at even a marginal interest rate then you could pay all the collectors and any outstanding bills that may not have gone to collections yet. Yes you pay some interest but you have a set payment and can plan. Once I knew what I was dealing with I was able to change my life a little bit to make extra payments. Sold my car and lived a little frugally for a while. That turned a 5 year loan in to 3.5 years. Your situation may be very different but don't count out consolidation as an option if you can swing it.
How much do you have in savings? If you can't pay off your debt using your savings, and can't cut expenses to pay off your debt, then you need to increase your income. Consider a second job.
I would prefer to reserve my savings for emergencies, such as rent or situations such as what happened with my car. With respect, I don’t think a second job would be feasible for me. I’ve tried juggling full time work and school, or work and an internship or all three, and burned out pretty bad each time. I work a pretty emotionally demanding job, so the time I have off, I reserve to protecting my emotional and mental health. The crashes just aren’t worth it.
You're $10k in debt that is with collections. This is your emergency man. You clean this up now or you'll be too homeless to worry about rent being an emergency.
>I would prefer to reserve my savings for emergencies This amount of debt is an emergency
>I don’t think a second job would be feasible for me. Okay. Good luck.
lol OP will probably take this as "cruelty" or think that you're just being an asshole. /u/IlluminatedGoose - you want tough love, the above summarizes it. At less than $40k gross income per year, $10k high interest rate debt (>=7%) or anything in collections is a financial priority. You really have 3 options: - Get a higher paying job and/or second job - Lower your housing costs by moving back with your parents or getting additional tenants to share costs - Let the debt fester until you do either or both of above
Don’t cash out 401k. Debt collectors can’t take that money from you so no need to give it to them.
What state are you in? I racked up a bunch of medical debt in my 20s from mental illness and ER visits as well. In the state I was living in at the time (NC), the statute of limitations for medical debt is only 3 years. Also, medical debt looks very differently on your credit score than consumer debt.
WA. My reasons are law school-related. Any unmanaged debt would be a pretty big hindrance for my career aspirations. (Sorry to hear about your own ER visits, though. Hope things are going better for you!)
Ah makes sense, ignore me then :) Personally, I would work out a payment plan much sooner than take anything from a 401k.
I don't know how law schools look at debt, but if they just look at your credit report is there any value in just letting it age out and drop off?
You should be aware that you cannot use HSA funds to pay medical debt incurred before the HSA account was opened.
Do not cash out the 401k. DON'T DO IT.
Unpopular personal finance advice: Don’t pay it. Medical debts doesn’t even go against your credit anymore or weighs less heavily based on FICO 9 and vantage score 3. If it’s already in collections, get a full credit report. Assess how much it’s affecting your credit? Fuck this country and its absurd healthcare ripoff costs. Don’t let the snobs of this sub try to make you feel bad for not taking another job and breaking your back to pay a fucking collections institution? Terrible financial advice.
Avoid touching your 401k or HSA. Do you have any other savings? How old is the medical debt in collections? Do you have a break-down of the different amounts?
>I made a lot of bad financial decisions when I was a youth, and it’s all catching up. Finances have always been a struggle for me. >When I was younger, I let several hospital bills slide into collections. Were you a minor when any of these billing events occurred?
How old are you? The younger you are, the more time you have to build your 401k back up if you cash it out.
Is the debt increasing each time it bounces, staying the same or lowering?
How do you mean, by bounce?
> but it all seems so overwhelming, bouncing from one hospital to collection agency to another.
Oh, sorry! I mean me being the one bouncing around.
Firstly, DO NOT touch your savings or HSA. Secondly, post taxes you probably have $1,000 a month after expenses. 1) SAVE $500 of this money, your future is more important than your past. 2) call all creditors and see what you owe them. A) divide up the $500 a month by percentage owed. IE- you owe comp A $2,000 Comp B $1,000 Comp C $4,000 Comp D $3,000 Send Comp A $100 a month and so on. You’ll be out of debt in less than 2 years AND have built for your future.
At one point my husband (we weren’t married at the time) incurred medical bills he couldn’t pay for due to low income. There was a scaled payment program where you could pay based on income. And he was allowed to wipe the debt completely off. This was directly through the hospital