Debt settlement, student loans, help!

Hello Ms. Savage,

I am 46 and am moving back in with my father (at his suggestion). The rent for my apartment is increasing as of July 1st & I decided not to renew. I’m already working two jobs (one full time & one part time). Both don’t pay much. I’ve been in debt since I was 19 & I’m finally sick of it. I was moving to a cheaper apartment (I’m paying $913 now) so I can pay off all my collection accounts & my student loan. Both are about $10K each. I wasn’t able to make much of a dent in my debt or my goal of having an emergency fund. I dream of being debt free. My father suggested I move in with him so I can pay off my debt. It wasn’t an easy choice for me to make since my father & I don’t get along, but my desire to be debt free trumps that.

I don’t have an exact total of my credit card debt. I am going through and opening envelopes to see which accounts are with which collection agencies so I know who to contact to get a balance. Some of these letters are offering settlement amounts. Although I do want to pay what I owe, anything I can do to get these debts taken care of quickly I would like to try. I want to build up my credit score, too. I don’t care to get another credit card (all my cards have been cancelled by the vendors so I’m used to living without them). I intend to eventually get another apartment, & I don’t want my credit score to hurt my chances.

Should I take a debt settlement offer? What will that do to my credit score? Is it true that the IRS will see that as additional income? I live in Illinois & I know some things vary from state to state.

I currently pay $100 a month on my student loan, and I know that$70 of that goes to interest. I intend to do the snowball method for paying off debt, from smallest to largest.

Thanks in advance for your help and suggestions.

 

Terry Says:  First, congratulations for facing up to your debt issues, and being willing to move back home to get out of debt.  This is a complicated question and I am going to send you straight to the people who can go through each of your debts, and advise you on whether to do a settlement, or just let it go to collection and maybe get a better deal.  Call 800-388-2227 to be connected to the nearest local office of the National Foundation for Consumer Credit.  They are non-profit and will help you go through your entire situation and figure out the best way to deal with it.  And please write back after you meet with them (in person or on the phone) and let me know what develops.