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Q. I divorced in 2021 and all the debt was in my name and my ex-wife did not need to assume any of the marital debt. I continued to pay on my credit cards but not on the ones that she used as I was hoping she\u2019d have to take that debt. It\u2019s now $33,000 and it\u2019s affecting my credit. A couple are in collections, but all of them are charged off. Recently, a debt consolidation company reached out to me to try to enter into a debt resolution fixed repayment plan. The statute of limitations for most of those cards is in two more years. What should I do next?<\/p>\n
\u2014 Debtor<\/p>\n
A. We\u2019re sorry to hear you have this debt and that it\u2019s now affecting your credit report.<\/a><\/p>\n Let\u2019s get to your options.<\/p>\n First, the statute of limitations starts when the last payment was made, said Karra Kingston, a bankruptcy attorney in Union City.<\/p>\n However, if you make a payment with the debt settlement company, then this will restart the statute of limitations, she said.<\/p>\n \u201cIt is important to note that debt settlement companies<\/a> are not always the right solution,\u201d she said. \u201cIf you have large debts and don\u2019t have the money to pay creditors, it is best to speak with a bankruptcy lawyer who does both settlements and bankruptcy so they can give you a full picture of your options.\u201d<\/p>\n Generally, if you don\u2019t do anything, it takes seven years for the late payments to fall off of your credit report, Kingston said, but sometimes it\u2019s longer when debts are sold off and the new creditor can start reporting these late payments.<\/p>\n But, the creditors can start suing you and get a judgment<\/a> against you if the statute of limitations has not run out.<\/p>\n A judgment means that they can garnish your wages, levy your bank accounts and put liens on any personal property, she said.<\/p>\n Kingston said there can be drawbacks to enter into a program with a debt settlement company and that not everyone is a good candidate.<\/p>\n \u201cDebt settlement only works for individuals who have the money to make payments,\u201d she said. \u201cMany people end up getting sued because they can\u2019t come up with the money to settle the debts.\u201d<\/p>\n For example, she said, if a person owes Citibank, Discover and Chase but only has the money to settle with one creditor, the other creditors may sue them.<\/p>\n Next, she said, debt settlement companies aren\u2019t able to settle all debts, and there are times when creditors won\u2019t work with the settlement company.<\/p>\n Also, you should know that when debts are settled, it could mean a tax bill.<\/a><\/p>\n You would receive a 1099-C for any forgiven debt of more than $500, he said. This means that you may have tax consequences at the end of the year.<\/p>\n \u201cFor example, if a person owes $10,000 worth of debt and the creditor and debtor reach a settlement of $6,000, then the debtor may have tax consequences on the $4,000 forgiven amount,\u201d she said.<\/p>\n Speak to some professionals who can look at the details of your debt and financial situation to help you choose the right path for you.<\/p>\n Email your questions to <\/i>Ask@NJMoneyHelp.com<\/i><\/a>.<\/i><\/p>\n Karin Price Mueller writes the <\/i>Bamboozled<\/i><\/a> column for NJ Advance Media and is the founder of <\/i>NJMoneyHelp.com.<\/i><\/a> Follow NJMoneyHelp on Twitter <\/i>@NJMoneyHelp.<\/i><\/a> Find <\/i>NJMoneyHelp on Facebook.<\/i><\/a> Sign up for <\/i>NJMoneyHelp.com<\/i><\/a>\u2019s <\/i>weekly e-newsletter.<\/i><\/a><\/p>\n<\/div>\n