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American Express Company Debt

I have an American Express account I used for company debt, which I have not paid. I am about to be sued. What are my options?

I have over a $30k company debt with AMEX. I have talked to several reps both AMEX and Collection firms. It appears that they have hired a new Attorney, that has filed a 10 day summons and had it served with AMEX as the plaintiff. However they are listing this debt with a personal name as an individual debt. I am unable to pay the debt, not to mention the 28% interest rates that started in January, My limit was was about $18k originally. I have felt it would be best to answer the summons with the facts that this is not a personal dept and ask for the case to be dismissed. Last I am a full-time employee. If they win the case and garnish my wages does the judge let them take all until the judgment is satisfied or will I still have living expenses? What is the best way to answer the summons? Is it better to represent yourself in a case like this or find an attorney? How would I find an attorney?

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Highlights

  • Determine if you have liability for the debt.
  • Explore your options to resolve American Express debt.
  • Find an attorney to help you if you are summoned to court.
  • Learn more about American Express debt.

There are two important issues in your situation. First, do you have liability for the debt? You mentioned the debt is, "company debt." This implies the debt was incurred to support a business. For example, you may have used your American Express card when traveling as part of your employment and made charges on an American Express account with the expectation that you would be reimbursed. Or, you may have run your own business and used the American Express card to purchase inventory or otherwise fund the business' operations. Regardless, the first key issue is whether you are listed as the primary account holder. If you signed a contract with American Express in which you agreed to accept liability for the account, then you are responsible for paying the balance due on the account.

You may say, "My employer went out of business an never reimbursed me," or "My business is defunct and no longer exists." In either situation (or variations on either), you are still responsible for for paying balance due on the American Express account because you agreed to when you signed the contract to open the account. However, if the account was your employer's or was in the name of your business and you were merely an authorized user, then you do not have liability for the debt. Therefore, the first question you need to answer is whether you are the primary account holder and have liability for the debt.

Let us assume you have liability for the American Express debt (I am not saying you do or do not -- you need to answer that question). Your second key issue is what do you do about it?

Debt Resolution Options

The four primary concerns for most consumers are:

  1. Monthly payment
  2. Time to debt freedom
  3. Total cost
  4. Credit rating impact of the resolution program

Be sure to evaluate each program relative to your prioritization of these factors.

Since there are a variety of debt resolution options, including credit counseling, debt negotiation/debt settlement, a debt consolidation loan, bankruptcy, and other debt resolution options, it is important to fully understand each option and then pick the solution that is right for you.

Credit Counseling

Credit counseling, or signing up for a debt management plan, is a very common form of debt consolidation. There are many companies offering credit counseling, which is essentially a way to make one payment directly to the credit counseling agency, which then distributes that payment to your creditors. Most times, a credit counseling agency will be able to lower your monthly payments by getting interest rate concessions from your lenders or creditors.

It is important to understand that in a credit counseling program, you are still repaying 100% of your debts -- but with lower monthly payments. On average, most credit counseling programs take around five years. While most credit counseling programs do not impact your FICO score, being enrolled in a credit counseling debt management plan does show up on your credit report, and, unfortunately, many lenders look at enrollment in credit counseling akin to filing for Chapter 13 Bankruptcy -- or using a third party to re-organize your debts.

Debt Settlement

Debt settlement, also called debt negotiation, is a form of debt consolidation that cuts your total debt, sometimes over 50%, with lower monthly payments. Debt settlement programs typically run around three years. It is important to keep in mind, however, that during the life of your debt settlement program, you are not paying your creditors. This means that a debt settlement solution of debt consolidation will negatively impact your credit rating. Your credit rating will not be good, at a minimum, for the term of your debt settlement program. However, debt settlement is usually the fastest and cheapest way to debt freedom, with a low monthly payment, while avoiding Chapter 7 Bankruptcy. The trade-off here is a negative credit rating versus saving money.

Debt Consolidation Loan

Many people think first of a debt consolidation loan when seeking debt consolidation. This option typically means a second home loan (or home equity line of credit) or refinancing your primary mortgage. In a debt consolidation loan, you exchange one loan for another. The most frequent form is taking out a mortgage loan, which carries a lower interest rate and is tax deductible, to pay off high interest rate credit card debt.

It is important to be aware that shifting unsecured debt to secured debt can create a volatile situation, if there is ever a chance that you cannot afford the new mortgage payment you are now putting yourself at risk of foreclosure! In the case of a debt consolidation loan, most mortgages are 30-year loan, which means that the total cost and the time to debt freedom could be very high, but the monthly payment will be lower than other options and there is no credit rating impact.

Bankruptcy

Bankruptcy may also solve your debt problems. A Chapter 7 bankruptcy is a traditional liquidation of assets and liabilities, and is usually considered a last resort. Since bankruptcy reform went into effect, it is much harder to file for bankruptcy. If you are considering bankruptcy, I encourage you to consult with a qualified bankruptcy attorney in your area.

Default

You may be curious what may happen if you do nothing. If you stop paying your unsecured debts, creditors have the right to collect the debt. First, you will likely receive collection calls and letters from the creditor directly. If you are still unable to pay the debt after several months, the creditor is likely to refer the account to a third-party collection agency.

Third-party collectors are known to be much more aggressive in their collection tactics than original creditors, so do not be surprised if the calls become more persistent, or even threatening. Thankfully, the Fair Debt Collections Practices Act has rules governing the behavior of collection agents. However, unscrupulous debt collection agents do not follow these rules.

In some cases, when all other collection efforts fail, a creditor will decide to file a lawsuit against the debtor. This is not a frequent occurrence, but it is within a creditor's rights and a possibility about which you should be aware. If one of your creditors sues you, the court will likely issue a judgment in the creditor’s favor. Depending on your state's laws regarding the enforcement of judgments, the creditor may be able to garnish your wages, levy your bank accounts, place a lien on your property, or take other action to enforce its judgment.

Regarding a credit report, default damages a credit score severely. In addition, default is a warning flag for many lenders, who will refuse to deal with a potential customer with a default on their record. As a result doing nothing and allowing default is a poor option for most consumers.

Summary

Although there are many forms of debt consolidation, many people with good to perfect credit who own homes should look into debt consolidation loans, while consumers with high credit card debt and poor credit may want to explore debt settlement or debt negotiation. However, each consumer is different, so find the debt consolidation option that fits for you.

Lastly, here are some fast tips for your own quick Debt Consolidation Evaluator:

  1. If you have perfect credit and have equity in your home -- consider a Mortgage Refinance.
  2. If you can afford a healthy monthly payment (about 3 percent of your total debt each month) and you want to protect yourself from collection and from going delinquent -- consider Credit Counseling.
  3. If you want the lowest monthly payment and want to get debt free for a low cost and short amount of time, AND you are willing to deal with adverse credit impacts and collections -- then evaluate Debt Settlement.
  4. If you cannot afford anything in a monthly payment (less than 1.5 percent of your total debt each month) -- consider Bankruptcy to see if Chapter 7 might be right for you.

Bills.com makes it easy for you to apply for traditional forms of debt relief.

Answering the Summons

Either appear at the hearing and represent yourself, or hire an attorney to do so. Do not ignore the hearing -- take action. If you do nothing the creditor will win by default and have a judgment against you. Once there is a judgment against you your options for resolving the debt decrease.

See the Bills.com resource find an attorney to learn how to hire an attorney who meets your needs.

More About American Express Debt

I have answered questions about American Express debt for other readers. See American Express Bill and AMEX Debt where a small business owner had $60,000 AMEX debt in collections and needed to know their options; American Express Debt Settlement where a reader asked if her or she could trust an unsigned faxed settlement offer from a collection agent; Negotiate American Express Debt where a reader wondered why an American Express collection agent required a hardship letter when negotiating a settlement; and Deceased's American Express Debt where an authorized user of an American Express account holder who died recently has liability for the debt.

I hope this information helps you Find. Learn & Save.

Best,

Bill

www.bills.com/

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