Q: Almost four years ago, I lost a job that paid $73,000. I have done everything I can to find any other job, but at 53 and due to the current economy, I have been unable to find work. I have past due medical bills that are being garnished from the second job that I have always had (thank God!). My wife has gone from a domestic engineer to working at a low-paying job at a start-up business. Our vehicle was repossessed, and we still owe $10,000 on it. There is credit card and tax debt. We are hounded by the same companies that Congress bailed out. Before the loss of my income, we were in the process of paying down our debt. I don’t know what to do. Help, I’m drowning?
Charles, St. Louis
A:This recession has taken a toll on a lot of families. Your story, unfortunately, is one I’m hearing from so many people across the country.
First and foremost, concentrate on paying only the basic bills—food, utilities and rent. At this point, everything else has to wait.
Now, this doesn’t mean you can’t do some things to get the other creditors off your back.
I want you to go to this site, run by the National Foundation for Credit Counseling (NFCC). In an effort to help many families such as yours, the NFCC has struck a deal with the nation’s top credit card issuers to provide two special debt repayment plans.
As part of this effort, you may qualify for a “standard” or “hardship” debt repayment plan with fixed monthly payments. The goal is to get you out of debt within 60 months.
If you qualify for the standard debt repayment plan, you would pay 2% of your outstanding debt each month. If you qualify for the hardship plan, your payments would drop to 1.75%. To make the plans work over a five-year repayment period, the participating creditors have agreed to stop or lower fees and interest. To find out whether you’re eligible for one of these programs contact a credit counseling agency in your area that is an NFCC member or call (800) 388-2227.
As for the IRS debt, contact the agency at (800) 829-1040. You may find the IRS much more sympathetic to your situation. Frontline IRS employees have been given the authority to be easier on people having trouble paying their taxes because of the economy. For example, IRS employees have greater authority to suspend collection actions in certain hardship cases where taxpayers are unable to pay. This includes instances when the taxpayer has recently lost a job, is relying solely on Social Security or welfare income or is facing devastating illness or significant medical bills.
If you contact the IRS and you still have trouble settling your debt issue, contact the Taxpayer Advocate Service at (877) 777–4778.
I know all this may seem daunting, but there is help. It may not provide immediate relief, but at least if you follow my suggestions, you’ll begin to put a plan into place so you can have some peace.