GREENSBORO, NC -- You make money, you spend money and chances are you owe money.
2WTK asked attorney Melissa Duncan of Duncan Law LLP to educate us on our rights when it comes to debt.
A common line of thinking is if a family member dies and they owe debts the company can come after you for the money. Melissa says, that is myth unless your name is on the debt. "If a family member dies with debt, the creditors can pursue the estate of your deceased family member, but they cannot come after you personally. However, if you were joint on the debt (you were a cosigner), then you will be responsible for the debt after your family member dies."
One of the most common calls Melissa's firm gets is about student loan debt and if filing for bankruptcy will make it go away
"Nothing makes student loans go away, even bankruptcy. What can happen is a way to lower the payment or delay payment. You can look into income based repayment, and deferment options."
You always hear about those debt consolidation companies. The way it works is you pay them and they take your payments and try to bargain with the creditors. For many, this is a good option. But there are key points we need to know.
"You're making a monthly payment, but you're not making it to your creditors, so legally, they can still come after you for your debt. Working with a debt consolidation company doesn't legally protect you. Also good to know is when that company will be going to your credit card company to bargain. It often takes time to build up a significant payment, which means you need to ask if they are going to go to your creditors in 6 months, 12 months or later. "
Sometimes bankruptcy is your best option, but it's not a cheap option. It can cost at least $2,000 in court and lawyer fees.
Another key point to know about debt is if you have $10,000 in debt and the company forgives half of that, you're not entirely done with the debt.
"At tax time you'll receive a 1099 form. The debt that was written off is now considered income. So you will have to pay tax on that income. "
WEB EXTRA INFO: FORECLOSURE
If you miss a couple of house payments and you contact the mortgage company and they will not work with you unless you pay all of the money you owe in one lump sum, you have a few options:
If you want to keep the house, you can declare bankruptcy.
If you want to get rid of the house a short sale or a deed in lieu of foreclosure are options. But be aware, the bank can come after you for the balance of what you owe on the property versus what it was sold for.