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$20,000 in Debt—Will I Go to Jail?

Written by Hannah Locklear
Last updated on May 13, 2026

Summary: Follow Solo's 7-step framework to go from debt crisis to financial freedom: respond to lawsuits, settle debts strategically, build emergency savings, invest in index funds, boost your credit score, and achieve long-term wealth. Expert attorney John Skiba shares why early communication and proper legal responses are crucial for getting the best settlement deals.

Facing $20,000 in credit card debt can feel overwhelming. The collection calls, threatening letters, and fear of legal action create stress that goes far beyond money. But here's what debt collectors don't want you to know: you have more power than you think.

In a recent episode of The Debt Hotline, consumer rights attorney John Skiba joined Solo founder George to break down exactly how to settle credit card debt in 2025. More importantly, they outlined a complete 7-step framework that takes you from debt crisis to building real wealth.

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You won't go to jail for credit card debt

Let's address the elephant in the room first. Despite what aggressive collectors might imply, you cannot go to jail for unpaid credit card debt. This is civil law, not criminal law.

"These are civil claims that they have," John Skiba explains. "Just because you defaulted on your credit card doesn't mean that one of their remedies is putting you in jail. It's really just they're trying to collect money and it's a completely civil matter."

The only rare exceptions involve contempt of court (ignoring a judge's direct order) or domestic support obligations like child support. For regular credit card debt, jail is simply not a possibility.

Responding properly to debt lawsuits protects your rights

When you receive a lawsuit, your response determines everything that happens next. According to John Skiba, 95% of people who get sued by a debt collector don't take that first step of filing an Answer.

This is the biggest mistake you can make. Without an Answer, collectors get a default judgment, which can double your debt with interest, attorney fees, and court costs. Once they have a judgment, they can garnish wages, levy bank accounts, or place liens on property.

The solution is simple but time-sensitive: file an Answer within your state's deadline (often 14-30 days depending on your location). Solo makes this process straightforward, helping you respond properly without expensive attorney fees.

Use Solo to respond to debt collection lawsuits fast.


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Credit card payment estimated at 24.99% APR over 60 months. Settlement estimate based on industry averages. Actual results vary.

The Solo steps provide your complete path from debt crisis to financial freedom

Rather than just surviving your debt crisis, Solo's 7-step framework creates a clear path to long-term financial success.

Here's how each step works:

Step 1: Respond to your lawsuit

Filing an Answer prevents default judgments and keeps you in control of the negotiation process. This single action can save you thousands in additional fees and interest while preserving your settlement leverage.

When Alana from Texas called The Debt Hotline about her $2,455 Citibank debt lawsuit, her biggest mistake was ignoring the original lawsuit three years ago. Now facing a motion for default judgment, she had to work much harder to negotiate a favorable outcome.

"The longer things go on, often the worse they can get as far as then it results in lawsuits and potentially judgments and garnishments," John warns. "Early communication is key."

Step 2: Settle your lawsuit

Once you've filed your Answer, you're in the strongest possible position to negotiate. Debt collectors know that court battles are expensive and uncertain, making them more willing to accept reasonable settlement offers.

Settlement amounts typically range from 20-60% of the original debt, depending on several factors:

John's approach focuses on painting a realistic picture for creditors: "I always try to view it through a lens of how difficult is it to collect against you? If you're on social security, which is protected under federal and state law, they can't garnish it."

Step 3: Settle your other debts

After resolving your lawsuit, tackle remaining debts strategically. Prioritize based on who's causing the most immediate pain through lawsuits or aggressive collection tactics.

Will from Nevada demonstrated this approach perfectly. He had already settled multiple debts before his final $7,970 lawsuit. By using SoloSuit to respond properly, he bought himself time to negotiate the best possible deal on his remaining debt.

John recommends focusing on one debt at a time: "Write them down and let's see who's being the most aggressive, who's going to cause the most pain first, is there a lawsuit that's filed? Let's deal with that one first."

Once your debts are settled, build a basic emergency fund to prevent future debt cycles. This $1,000 buffer handles minor emergencies without forcing you back onto credit cards.

Completing your legal foundation means ensuring all court documents are properly filed, settlement agreements are documented in writing, and your credit reports reflect accurate information about resolved debts.

Step 5: Automate investments into index funds

Real wealth building begins with consistent investing in diversified index funds. These investments give you ownership stakes in hundreds of publicly traded companies, letting you benefit from overall economic growth.

"Real wealth is in ownership," George explains. "Lawyers get wealthy because they own part of a law firm. Business founders get wealthy because they own part of a business. Some people get wealthy in the stock market because they own part of the businesses that they're trading."

Automation removes the emotional decisions from investing, ensuring consistent contributions regardless of market conditions.

Step 6: Boost your credit score to 800

Many Solo users start in the 500s or lower, but credit scores can be rebuilt systematically. Focus on:

  • Keeping settled accounts updated correctly on credit reports
  • Maintaining low credit utilization on any remaining cards
  • Making all payments on time consistently
  • Avoiding new debt while rebuilding

Step 7: Prosper and become a millionaire

The final step represents Solo's ultimate goal: helping users build substantial wealth and achieve financial independence.

This happens through consistent application of steps 4-6 over many years, combined with potential income growth and smart financial decisions.

These real examples demonstrate how the steps work in practice

The callers on The Debt Hotline demonstrate how this framework plays out in real situations:

Alana's turnaround: Despite ignoring her original lawsuit, Alana successfully negotiated a $500 settlement on her $2,455 debt, which was roughly 20% of the original amount. The key was finally taking action and communicating directly with the law firm handling her case.

Will's strategic approach: By using SoloSuit to respond to his lawsuit, Will positioned himself for settlement negotiations on his final $7,970 debt. Having already resolved multiple other debts, he understood the process and could focus on timing his negotiation properly.

These examples show that even serious debt situations can be resolved favorably with the right approach and tools.

Follow these expert tips for better debt settlements

John Skiba's 20 years of experience in consumer law provide several key insights for better settlements:

  • Communicate early and often: Avoiding collection calls and letters only makes situations worse over time. The earlier you engage with creditors, the more options you'll have for favorable settlements.
  • Understand your leverage: Debt buyers purchase portfolios for "about 4 cents per dollar according to FTC studies," giving you significant negotiation power since they're still profitable at much lower settlement amounts.
  • Document financial hardships: Share relevant information about limited income, medical issues, or other circumstances that make collection difficult—without revealing specific asset information.
  • Get agreements in writing: Never make payments until you receive written confirmation of settlement terms, including the final amount and agreement that the debt is considered resolved.
  • Consider timing: Negotiating before creditors invest heavily in legal proceedings typically results in lower settlement amounts, though you can still reach agreements even after lawsuits are filed or judgments entered.
Negotiate directly with debt collectors using SoloSettle.

Moving beyond your current debt crisis and achieving financial freedom requires more than just paying off what you owe. Solo's 7-step framework provides the roadmap to learn how to build systems that create lasting wealth and financial security, while tools like SoloSuit and SoloSettle handle the technical aspects of legal responses and settlement negotiations.

Whether you're facing your first collection letter or dealing with multiple lawsuits, remember that you have options and rights. The key is taking action early, communicating strategically, and following a proven system that thousands of people have used to resolve their debts and build better financial futures.

Transcript

George (00:02):

If you open the mailbox and there it's a debt collection letter, suddenly your heart sinks. What do you do next? This is the Debt Hotline hosted by Team Solo. Whether you're here for crazy real life debt stories or tips on resolving your debts for good, you've come to the right place. I'm George, founder and CEO of Solo, the trusted platform that's helped hundreds of thousands of people respond to debt lawsuits and resolve debt. Join us weekly to hear from debt experts, debt collectors and debt survivors. No shame, no judgment to straight answers, and a fresh start. Alrighty folks, this is George, founder of Solo and this is the debt hotline. Today we have our friend John Skiba on, and John, very good to have you on.

John Skiba (00:50):

Yeah, I'm excited to be here. Once again, love coming on the show.

George (00:52):

Fantastic. John s Skiba is an experience to bankruptcy and consumer rights attorney and owner of the Arizona Consumer Law Group, PLC. He has helped more than 10,000 families struggling with overwhelming debt issues. He runs the Consumer Warrior YouTube channel with more than 70,000 subscribers and helps educate consumers on their rights, how to settle debt, how to file bankruptcy, and how to deal with debt struggles. So again, John, happy to have you on. The initial topic for today is how to settle credit card debt in 2025. So John, what's the main take process for settling credit card debt?

John Skiba (01:39):

Well, I mean a lot of it'll depend. I, there's a lot of different factors that go into how good of a settlement you're going to get, how low you can get it, but I always say the overall arching principle of all this, you got to look at it. If the credit card company, the debt collector, they want money. If you're offering money, there's got to be some middle ground. That's how I always approach this, that there's got to be something we can get done here. The big thing is communication. Too often I see people avoid communicating with either phone calls, the debt collector, they're getting letters in the mail and they don't do anything. The longer things go on, often the worst they can get as far as then it results in lawsuits and potentially judgments and garnishments. Often here in my law practice in Arizona, people will call me and once they get to the garnishment stage at that stage, negotiation is really tough.

All the leverage is with the creditor and really there's not a whole ton other than a bankruptcy option that you get. So my recommendation, if you're looking to settle the debt, if you're looking to avoid dealing with lawsuits and bankruptcy and everything else, early communication is key. Even with the original creditor, before they charge it off or sell it is reaching out to them and just saying, Hey, what's available? I've been surprised at some of even the big banks, people who are current come to them and say, look, I have this hardship situation. I'd like to try to get this resolved. I'd like to try to get it settled. What can I do? And they may not give something that's perfect, but sometimes I'm surprised at the options that if you're communicating that they do offer even early on in the process, fantastic tips,

George (03:17):

Get to know people can settle at any step along the way. In collections, you can oftentimes get a deal and resolve things at any point in the process. Folks, if you have any questions today, just call the debt hotline. You can reach us at 801-613-8181. So if you have any questions, call to the hotline at six one three eight one eight one. You can just call us right now. We also have people who have written in some questions ahead of time. So we have our first question from Eric in Ohio. Is it better to wait a few more years for the statute of limitations on debt? Is there a way to clear these off your credit after or will you still technically owe them even after the statute of limitations has expired?

John Skiba (04:08):

Yeah, I mean it's a good question. I mean, the statute of limitations is the amount of time that a creditor has to file a lawsuit. Really, it usually starts running roughly 30 days after the payment is due. You're technically in default at that point, and the statute of limitations varies from state to state. In a lot of states, like here in Arizona, it's six years they have to file a lawsuit and even if the statute of limitation has run, if it's expired, the creditor can still try and ask you to voluntarily pay. Now they've lost some of the teeth, they've lost some of their hammers to come after you because they can't sue you anymore. And because of that, if it's outside the statute of limitations, your settlement offer should be lower and they'll be willing to take less because there's not a whole lot they can do other than saying, please will you go ahead and pay this to us?

But because I mean in some states the statute of limitations can be 10 years, so it could be a long time that you're dealing with this where it's impacting credit score overall. So like I said before, I don't think there's any downside to trying to communicate to resolve the debt, try to settle it even early on. Something that a lot of people worry about is maybe the potential impact if they do get sued later. There's a rule of evidence if a lawsuit is filed, the states that settlement discussions are typically not admissible in court and the reason why is because the courts want the parties to talk and try to negotiate and get something done. So I don't think there's any downside to reaching out. I usually recommend you come up with an offer, something that you can propose to the creditor. It's rare when I'm negotiating with a creditor that I can call up the creditor's attorney and say, Hey, what'll you take? And they're going to say, well, provide me an offer and then we'll take it to our client. So it's something you need to look and kind of determine what's your settlement budget, how much you think you can afford, whether a monthly payment, lump sum, and then go to the creditor, maybe see what options are available and present that settlement proposal and see what kind of response you get to it.

George (06:13):

Of the people on Facebook marketplace that text me and say, what's your lowest offer? How low can you go right out of the gate. I mean that sarcastically because I just tell them the list price it's listed for $500. Yeah, exactly. Same to negotiate myself down, right? Yep. Say my day here folks, if you want to get a deal, you have to determine what you can do and also nobody is more of a professional negotiator than a debt collector. They do it all the time. They're most interested in the facts of your situation, most interested in your actual actual facts. They aren't interested in your wild, crazy story. It is not so much that you got into a medical situation that you had cancer and the cancer was really hard and sad and it made you really sad and your family sad. I mostly just interested in you had cancer and it costs a lot of money, and then we can give you a discount on the debt potentially because a creditor will allow it.

John Skiba (07:21):

Yeah, yeah. I think that I tell clients often my job when I'm trying to negotiate a settlement is really to paint a picture for the creditor and really kind of do the creditor's job allow them to take, I am dealing with attorneys often, but to help that attorney, the creditor's attorney really sell this proposal to their client, there's got to be some reason why they should take less and I always try to view it through a lens of how difficult is it to collect against you? You're a consumer who has a debt issue. Is it something where you have a real high paying job, you own a bunch of real estate? If there's all those things that you have that would be easy for them to go after, they're probably going to be less inclined to take a settlement. But if you're on social security, which is protected under federal and state law, they can't garnish it if you don't own any real estate, if maybe if there are some medical issues, those types of things I think are good to bring up because they tell the debt collector, look, this is not going to be easy for us to collect in the long run. Maybe we better take what we can get now and just get us settled.

George (08:28):

Indeed. Great tips. Next question from Katina in Pennsylvania. I would like to know if debt consolidation programs are helpful or harmful to consumers.

John Skiba (08:40):

This is a good question and I'll tell your audience what I tell people who come into my office, you're talking to a bankruptcy attorney asking that question, so I have my own biases, but a lot of I think is understanding how these companies work when you go on to reset your debt through them, usually what they do is they will set up a payment plan, you'll start paying them, they're going to take their fee out of what you're paying each month and then they put the bulk of it in essentially a savings account. They're going to build up a balance that they can then reach out to your creditors and negotiate. So I've seen it work for people who have relatively few creditors. If you come in there, you have three or four credit cards, $20,000 in debt, you're able to put a significant amount.

It's something that can happen fairly quickly. I've seen it be effective in those cases where I have not seen it be very effective is if there's a large amount of debt, or I should say, and or a lot of creditors, if you come in with a dozen different credit cards, often it's difficult for them to get everybody on board or they're trying to set money aside from what you're paying them, and then they will go in and they may be able to settle one or two, but then you get hit with a lawsuit from creditors three and four. So I think it's really kind of case by case. Where I have personally seen it be more successful is where the debts are not extremely high and the creditors are less than a handful or there's not a lot of different people that they have to try to negotiate with to get 'em all on board to make it really work for you.

George (10:17):

Yeah. Folks, just laying out the landscape a little bit for you, Katina, there's a variety of options for somebody who's in an extreme debt situation. One, you have bankruptcy, chapter seven, that's where all of your debt gets deleted. You have to qualify for it. Bankruptcy chapter 13, that's where you get on a payment plan to pay back all of your debts. You can debt settlement with a debt settlement firm. That's where you enroll all of your debt. If you have any debt that's not in collections or in litigation, you default on that debt. You stop paying the debt, you pay your money into an escrow account, and then the debt settlement firm will eventually settle for you, probably offer you a refinancing loan to pay off all of the debts at some point in time and that allows them to get paid quicker, et cetera.

So that's debt settlement. And then you have debt consolidation, which oftentimes is used kind of interchangeably, but all I do is debt consolidation primarily to refer to a loan that's refinancing other loans. So you can do a debt consolidation. That's where you get a personal loan to pay off three credit card debts, and then you have one payment hopefully at a lower interest rate on that personal loan. So that's like debt consolidation. You also have credit counseling. Credit counseling is oftentimes nonprofit service that you can find online where people will a licensed credit counselor and they give you advice you meet with a month, a month, et cetera, et cetera, and that is a requirement for chapter seven or something along those lines is a requirement for chapter seven is doing credit counsel with solo. Where we sit is you can use us to respond to your lawsuit, so if we're being sued for debt, you can use this to respond.

And then we also have SoloSettle, which is not a debt settlement firm, it's doing something new that works well for the consumer and the collector where we just connect you with the collector and make it easy for you to pay off the debt quickly at a discount. So whereas look at that settlement firm, average time to settle is like 12 months plus oftentimes up to 24 months before you actually get a settlement. With SoloSettle, you can get a settlement instantaneously. Average settlement is 11 days to payoff. So that's kind the broad landscape of offering here. You also have credit repair, the list goes on. You also have credit repair, so those are companies where you'll pay them a monthly subscription, like 30 to a hundred dollars a month and they will essentially just monitor your credit and send FCRA dispute letters to the credit bureaus for you to get stuff removed off of your record. Also, they'll help you pay off debts that you'll, I think that's pretty much the landscape. John, did I miss anything? Is that pretty comprehensive?

John Skiba (13:26):

Yeah, no, I think you really hit on really kind of all the different options and there is a lot of different things that you can do. Again, we always talk about taking action, choosing one and going with it, but making sure too you're putting your money where you're going to get the most resolution for it. And so it's good to really get a bunch of opinions as far as which way to go with it. But yeah, no, I think you hit it all.

George (13:50):

Okay, great. Looks like we have somebody calling into the hotline. How's it going? This is George

Debt Hotline Guest: Alana (13:57):

Alana.

George (13:58):

Alana, how's it going?

Debt Hotline Guest: Alana (13:59):

Good, how are y'all

George (14:01):

Doing great. You lied with John and George on the debt hotline. So go ahead and tell us about your situation.

Debt Hotline Guest: Alana (14:07):

So I had a credit card from Citibank that has been charged off with a total of $2,455. They sued me three years ago. I did not respond to the courts. I just thought, oh, well I'm not going to go to jail, so why worry about this? So now they have come back three years later with a motion for default judgment and I'm wondering where I should go from here. They've sold my debt to a second party and they're the ones actually suing me I guess. So I was wondering if I should reach out to the second party, should I reach out to their lawyers that sent me the paperwork or what I need to do.

George (14:56):

Great. Yeah, thanks for calling in. Happy to help you out with this. So you said it's a credit card debt with Citibank and you were, so you're sued three years ago now. Three years later, about filing motion for default judgment. How'd you get into this situation? Was the debt for anything in particular, just general credit debt?

Debt Hotline Guest: Alana (15:18):

No, I would say young and dumb.

George (15:20):
Young and dumb. Just spending money. You buy anything cool?

Debt Hotline Guest: Alana (15:23):

Not really.

George (15:25):

Nothing particularly interesting. Okay, and how are you doing now? What are you doing for work? What kind of money you're bringing in?

Debt Hotline Guest: Alana (15:35):

I bring in probably about $3,000 a month, so still not much, but I'm actually doing the Dave Ramsey program, so I'm working on my debts, so I'm trying to figure out where to go.

George (15:47):

I see you're working on paying off your debts and becoming debt free. That's great. Glad to hear it. We are fans of Dave Ramsey's show, so that's great. Do you have any other debts that are in the pipeline here? Is this pretty much the only one in collections?

Debt Hotline Guest: Alana (16:03):

I think I have a couple more, but nothing that's coming against me like this.

George (16:10):

A good job getting to three KA month. That's a great place to start, a great platform to work with. John, what's your take here?

John Skiba (16:20):

Well, I mean what I would look at is one, I mean if they're filing for a default judgment, you want to try to avoid that if you can because what happens when there's a default judgment is entered usually, I mean that 24, 20 $500 that they're suing you for, you might see it, I mean literally double. They might, sometimes they'll add pre-judgment interest post-judgment, interest attorney's fees, and if you don't respond, if you don't file an answer to the lawsuit, often the courts will just, they'll kind of interpret that as you're saying, okay, I'm okay with everything that they're seeking and even the courts don't do a lot of digging into exactly what they're throwing in there. So I would recommend at a minimum trying to file an answer even if they file that motion for default at this point I try to get something filed like George talked about, Solo does that as well.

They can help you get an answer on file and then you can try to negotiate it even if it's at the lawsuit stage or even if it's the judgment's been entered. I can tell you I have worked with countless clients where the creditor is still willing to do some type of settlement, whether a lump sum like on a $2,500 account, they might be willing to take my just baseline is 50%. If you can set up for 50% or even hopefully somewhat less than that or even a long-term payment plan, if you're doing day Ramsey snowball type thing, you may be able to work something into your budget where you can put that on a snowball as well and they will agree to it if they filed a lawsuit. Sometimes they'll require something called a stipulated judgment or sometimes we call it a pocket judgment where they draft up a judgment, say, okay, you're going to pay 150 bucks a month for this X amount of months and we agree not to pursue you on this judgment so long as you're making those payments, so you still have some options, but I would recommend filing an answer just to try to avoid that default.

There's all these steps along the way where the negotiating power gets further and further to the creditor and having a default judgment entered would be one of those. So that's probably the first thing I would do and then try to negotiate something and you're going to have to go through their lawyers at that point. If you call the creditor, if you call the original creditor, they're just going to give you a phone number that circles back to the attorney anyway, so I would just reach out to their law office.

Debt Hotline Guest: Alana (18:45):

So I guess I should say that I already did that today and I put in an offer to settle for 500. Now they did tell me that if it was accepted that I would just pay it and as soon as their lawyers got proof of payment, then they would send that to the courts and say to dismiss the case. Does that sound right?

John Skiba (19:08):

Yes. I mean that's typical procedure. The only thing I would be careful of if they've already filed a motion for a default, the court's not aware that these discussions are going on between the parties, and so if it's something they get back to you tomorrow morning and you got a deal done, then okay, you're probably okay. Then sometimes though they take a while to get back to you and if they do, to me the safest thing to do would be to go ahead and file an answer, but you may want to follow up and say, Hey, how quickly am I going to get a response back on this because if not, I need to file this with the court just so that you don't end up with the default.

George (19:48):

Okay. Clarifying a couple things for you Alana. So who's the law firm on this?

Debt Hotline Guest: Alana (19:54):

Jenkins and Young PC

George (19:56):

And what state is it in?

Debt Hotline Guest: Alana (20:00): Texas.

George (20:02):

Okay, great. Yeah, so with Solo, people use our platform to settle a lot of debts, especially in Texas. So you're welcome to make an offer to the collector via SoloSettle and then we take care of the software, takes care of a lot of process for you and once it's settled you can pay the collector through the platform and protect your financial information from some online portal where you would pay otherwise. So that's helpful. $500 on $2,500 debt, that'd be a pretty sweet deal for sure, especially for something that is this late stage. Usually the later things get in the process, the higher the required settlement parameters will be for the collector. So if it's in litigation now, the collector spent a lot of money on the debt so they aren't able to settle for as low of an amount. And so you said this was a credit card for Citibank and the motion for default judgment was filed. John, is it a little bit weird that the default judgment isn't getting filed until three years later?

John Skiba (21:13):

Yeah, I guess procedurally that's why I didn't understand. I mean if the lawsuit was filed three years ago and Alana, you couldn't correct me, but if that does seem strange, because most courts, if the creditor's not pushing the case, they'll dismiss it on their own. So I guess that's the only thing I would mean. You may want to just double check that there is not a judgment already entered and this is some type of post- judgment proceeding where they're trying to do a garnishment or something like that, or if they didn't file, if they just recently filed the lawsuit, that makes more sense. If they filed it within the last four or five months, they filed it three years ago, I would want to really look at the docket and see exactly maybe what's been going on here, why there's such a delay in this.

Debt Hotline Guest: Alana (21:57):

I think they just filed it August 12th of 25.

John Skiba (22:01):

Okay, so would make, if that's when they filed the lawsuit, that would, well even then they wouldn't be, if that's the motion for default judgment, I guess we'd want to find out when they filed the actual lawsuit. Still 14 days. I think it's 14 day deadline in Texas. Okay, that's quick. Okay. It's pretty respond quickly in Texas. Yeah, so that may be, so what happened three years

George (22:25):

Ago? You're saying that maybe they sued you three years ago?

Debt Hotline Guest: Alana (22:29):

Yeah, honestly I was just like, oh, it's a little bit of credit card debt. I mean everybody has that, so why worry about it? I was just young.

George (22:38):

They actually sued you, like they sent you a lawsuit and you lost the lawsuit three years ago. Do you know or did they just try to collect from you three years ago?

Debt Hotline Guest: Alana (22:46):

I think they may have just tried to collect from me. I know the constable brought it to my house, so I thought that was kind of weird. Okay.

George (22:54):

Yeah, so what I do next is you can gather up all your documents, gather up all your documents, and then you can connect, you can use our Ask Solo feature on our site. You can upload all of those documents and then chat with SOLO to get tips on what these documents mean exactly so you can get a better understanding of your case. Think some things aren't necessarily adding up for John and I and that it sounds like either you were sued three years ago and now you're receiving a writ of garnishment and they attached a motion for default judgment that was already granted, or they sued you recently and they sent you a proposed order for default judgment, which can't be filed yet really because you haven't let your deadline to respond lapse. So I take all those documents, take pictures of them, upload 'em on the ask solo chat and get some tips from there. All right, Alana, thanks so much for calling in.

Debt Hotline Guest: Alana (23:51):

Okay, thank you.

George (23:53):

Thank you. Looking at the next question from someone who wrote in Amanda in Ohio, I have about $20,000 of debt. I have been contacted by email and text by some collectors along with the threats of being sued and being a criminal. I have set up repayments with a few, but not all my wages were being garnished for one debt, but since I switched careers, I haven't been able to get in contact with them. I'm afraid that I'm going to jail or my pay will be completely gone. I fell behind due to job changes and lower income. I need advice of any kind to help. Thank you. Quite the situation for Amanda.

John Skiba (24:40):

Okay, so 20,000 in debt, got, there was a garnishment in the past. Did I get that right And then, sorry, I'm keeping notes here. The one thing that stood out is there's no jail, so I do tell people that. I always say we always go to this horrible place in our mind, particularly like Alana said, the constables coming to the house and it's really invasive that this is all happening. These are civil claims that they have, and so $20,000 a debt, I mean it's a good chunk, but it's also something that can be dealt with a number of ways. I mean, I always say if you're going to look at a settlement option, I always say just write 'em down and let's see who's being the most aggressive, who's going to cause the most pain first, is there a lawsuit that's filed? Let's deal with that one first.

If it's something where they're just all kind of out there calling, emailing, that kind of thing, it's important to remember until they get a judgment, there's not a whole lot they can do to you. They can damage your credit score, but they can't garnish your wages, they can't lien your house or anything like that. So if they haven't filed a lawsuit often they're pretty noisy and intimidating and annoying because that's kind of the tools that they have to try to get payment. You still have time to try to negotiate it If it's something where things get totally overwhelming, I mean there is a bankruptcy option, chapter seven bankruptcy eliminates these debts completely, but if you're trying to avoid that, like I said, 20,000 is 20,000, but at least compared to what I see every day, that's something I see that a lot of people can manage over time, but I would prioritize who you're going to deal with first and then attack that and I prioritize that again by who's causing the most pain at this point? Who is it? Who's closest to filing a lawsuit or who already has a judgment? Those types of things are kind of how I approach it.

George (26:33):

And going back and clarifying something that John said for you, Amanda, you don't end up in jail in a debt lawsuit because it's a civil matter, so it's dealing with civil law. It's a different section of the courthouse kind of entirely. Whereas the only stuff that can put you in jail is criminal law stuff, generally speaking. So you go to jail for criminal offenses, you did battery, you assaulted someone, you can go to jail for that kind of stuff. But this is in civil law, usually jail penalties are not available in civil law, so what can happen is you can be told not to do something, you can get an injunction. That's where the judge slaps you on the hand and tells you to stop doing stuff. You can get monetary damages. That's usually what is awarded in civil cases. That's where the judge says you have to pay the collector all of the money that's owed.

John Skiba (27:31):

And the only exceptions to the jail rule, and they're minimal and that's why I usually don't even bring 'em up taxes if you don't pay your taxes and even then truthfully, it's very, very rare. The other one is what we call domestic support obligations. If you owe child support spousal support, you don't pay that. Eventually you could find yourself in jail. The third one is if they have a judgment, if a creditor gets a judgment against you and the court orders you to come in and to provide information on assets and you just ignore that, then the court could hold you in contempt for ignoring their court order. And so again, the underlying team of everything is engage, communicate, participate. It's when you ignore stuff like that at a very late part of the process where I've seen it become a problem because the court can hold you in contempt for not following their orders and they can issue a warrant, and I've had that happen for clients who don't show up to different things, those are very, very rare. Just because you defaulted on your credit card doesn't mean that one of their remedies is putting you in jail. It's really just they're trying to collect money and it's a completely civil matter.

George (28:47):

And usually when you hear stories about this, about debtors going to jail, that's what people are reporting on. It's a bit sensationalist, but they're reporting on people going to jail for violating a warrant and being held in contempt of court. That is where that comes into play, but there's no debtors prison in the United States. You have one from Golden Child. What if you were a victim of identity fraud, but the debt collector is still trying to sue?

John Skiba (29:16):

Yeah, so when I have clients who come in and say, Hey, I'm getting sued by this creditor, it's an identity theft situation, this again is important to communicate early on. I usually will even before I file the answer, I'll just pick up the phone, call the other attorney and say, Hey, this is an identity theft issue. Could we get an extension on filing that answer while we try to work this out? Sometimes I know that's difficult for self-represented people, and so you may want to just file an answer and include that as one of your defenses that this is an identity theft issue. Most law firms, what they will do is they will provide you and they call it an identity theft affidavit, which is sometimes each law firm has their own version of this, but a lot of creditors have this, and it is kind of a two-edged sword.

They do require you to provide a lot of information about you personally. A lot of stuff I'm kind of uncomfortable is what they want to provide, and I don't provide it. If they're wanting to know all of your personal financial information, I don't provide that, but they're going to want to know what the facts surrounding the identity theft. They're usually going to want to know if you know the identity. Unfortunately, a lot of identity theft that I see is actually by other family members that may be using people's identity theft or their social security and things like that without permission. So it does get a little bit tricky, but I make it known early that there's an identity theft issue, but you are going to have to provide some information. I usually recommend people go and file a police report if there's been an identity theft issue, and usually I can tell you the police, they take it, they write it down, and they don't do anything.

99% of the time they don't do anything, but it helps to be able to show, Hey, look, I did this. Particularly if you file to get the port report done before somebody ever sues you about it just so you have it, so you can say, look, I already filed this. This is an issue, and I have seen when you fill out that affidavit, if you can provide a police report showing that there was an ID theft issue, in my experience, the creditors drop it, the burden's on them to prove this case, and if you can come in saying, this wasn't me, and here's the steps I took to be able to show that it wasn't me, a lot of times they'll just drop the case and move on to the other. It's not guaranteed, but that's been my experience.

George (31:36):

Thank you for those tips. John. We have another person calling in. Will you are on live. This is George with the outline. How's it going?

Debt Hotline Guest: Will (31:44):

Hey, good, and yourself?

George (31:46):

Doing great. Tell us about your situation.

Debt Hotline Guest: Will (31:49):

Yeah, so I recently replied to a debt lawsuit. I actually went through SoloSuit for this. I had initially listened and watched some of John's videos that he does on responding to these lawsuits in terms of going one by one through the allegations and whether you deny or what have you. Long story short, I denied all the allegations based on SoloSuit's recommendation, and so I guess my question is what can I expect? Now that I've responded to it, I assume that it buys me a little bit of time to negotiate a better settlement with the creditor. Just curious. This is the first time I've actually responded settling. I had a number of other suits that I settled before I even got to the answering deadline, but just curious, in your experience, what does that settlement look like at this point?

George (32:52):

Okay, yeah, happy to weigh in on that. How'd you get into this situation or some life event that led to this debt?

Debt Hotline Guest: Will (33:00):

Yeah, well, truth be told, just kind of over our skis on a number of things and so just couldn't keep up with the payments at a certain point, and we did have some medical things come up that kind of depleted some of our savings, so it was just a combination.

George (33:22):

Yeah, sorry to hear about the medical situation, and that's oftentimes what happens in the situation is people have large medical bills that come up and then what that turns into is credit card debt. There's not necessarily an unpaid medical bill. People will pay the bill and then end up with credit card debt as a result.

So glad to hear that you use solo to respond to the lawsuit, so that's the right first step. Congrats on doing that. What we call that solo. Step one is just responding to this lawsuit of getting that thing out of the way, and then for most people what we point to is then settle. Step number two, settle your lawsuit, step three, settle all of your other debts, and then after that you can start making, getting things right in track. Save up a thousand dollars stash or emergency fund, complete your legal foundation, do some great things like that. So for most people, the best outcome is going to be to settle, so if you recognize this debt, you're familiar with it, probably the best outcome is just going to be to make an offer to the collector on civil settle and try to get a resolution in place. John, what are your thoughts?

John Skiba (34:37):

Yeah, what state are you in Will?

Debt Hotline Guest: Will (34:39):

Nevada.

John Skiba (34:40):

Nevada, okay. Each day is a little bit different than procedures. I mean, the fact that you filed the answer is, I mean, that's a great first step. We often talk about 95% of people don't do that, and so you're way ahead of the game already. Most states will then have 30, 40 days later, they're going to provide you with their initial disclosures, so they're going to provide you with any documents or evidence they have, and then there may be a court hearing called a pretrial conference, or they may file something called a motion for summary judgment. All of that is, I mean, we're looking at least 30 to maybe 120 days down the road, so the good news is you can take those steps that George is talking about. I think now is a great time to reach out, try to get that settlement proposed to them before there's something like a motion for summary judgment pending.

There is a little bit of a lull here because it does give you a little bit of breathing room, but now's a good time, reach out and try to get something resolved because if they file the motion for summary judgment, that's them basically saying, Hey judge, we don't need a trial. Just look at all of our documents and tell us if we win. Again. It's kind of that there's always that balance that we're trying to get of putting yourself in the best position to get the lowest settlement possible. The sooner you do that, in my experience, the better a deal you're going to get overall. So you did the first step. Great, and I would immediately jump in and let's see if you can get something settled with it.

Debt Hotline Guest: Will (36:07):

Yeah, fair enough. I think the situation that I'm in is I had a number of creditors come after me, and I've basically depleted all potential funds in settling all those other suits, and so this was the last one, and so now I'm kind of trying to buy some time so that I can negotiate that at this point.

George (36:33):

How big is the debt?

Debt Hotline Guest: Will (36:35):

This one, the last remaining debt is for 79 70, so less than $10,000.

George (36:44):

So it's $7,900?

Debt Hotline Guest: Will (36:46):

Correct. $7,970. Okay.

George (36:49):

Congrats on wrapping up all the other debts. Yeah. Who's the creditor?

Debt Hotline Guest: Will (36:53):

The creditor on this one is Citibank through. Do you want to know the attorney's?

George (37:00):

Yeah

Debt Hotline Guest: Will (37:01):

It's through the Moore Law Group.

George (37:03):

Yeah. A lot of people get resolution with more law groups through, so settle. We see them quite often. Something that might help in your situation, so a lot of sometimes people will settle on a lump sum payment plan, so you have like a thousand dollars debt, somebody settles it for a one-time payment of $600. On the other end, people will do monthly payments over a long period of time.

Debt Hotline Guest: Will (37:28):

I've done a combination of both of them on the previous settlements.

George (37:33):

So maybe like a monthly payment plan or 80% of the balance over 36 months might work well for you. Most collectors will go down to like a hundred dollars a month payment as well. Sometimes they'll even want to, sometimes they'll go for a tiered payment plan, something along those lines, but certainly filing the answer is the right first step.

Debt Hotline Guest: Will (37:56):

Okay.

George (37:57):

Fantastic. Thanks so much for calling in.

Debt Hotline Guest: Will (37:59):

Thank you.

George (38:00):

Great. Yeah, and folks? Yep. SoloSettle’s a great option. We just had one Soloist settle, $120,000 debt for 60 K just last week. They deleted $60,000 in debt in just a few days, so that's a fantastic win for them. Debt settlement really can be a great tool for getting back on the right track, getting your feet underneath you, and economic mobility. Folks, just want to share our SoloSteps one more time, right, so first step is to respond to your lawsuit. Step two, settle your lawsuit. Step three, settle your other debts. Step four, make a one K stash and complete your legal foundation. Step five, automate investments into index funds. So if you guys are listening in and you've resolved all of the debt that's coming at you, or if you're like Will and you're about to get the debts that are in collections wrapped up, you can start thinking about saving up.

Again, a great way to build wealth is to automate investments into index funds specifically, and that's just a great way to take advantage of stock market growth across all publicly traded companies because real wealth is in ownership, right? Lawyers get wealthy because they own part of a law firm. Business founders get wealthy because they own part of a business. Some people get wealthy in the stock market because they own part of the businesses that they're trading, et cetera. Then step six, boost your credit score 800. A lot of people on solo are in the five hundreds, sometimes even lower, but you can get back up into the 600, seven hundreds and 800, and then step seven is prosper, become a millionaire, a solo. We want people to grow their net worth and become wealthy, and we're here to help you every step of the way. John, thanks so much for coming onto the show.

John Skiba (39:57):

Yeah, thanks for having me again. It's been great. Appreciate it.

George (40:00):

All right. Thanks for showing up folks. Everybody. Take care.

Disclaimer: The information presented in this podcast is intended strictly for general informational purposes and should not be construed as legal, financial, or investment advice. Solo and its hosts are not licensed attorneys, financial advisors, or other certified professionals. While select guests may hold active professional licenses, their contributions are purely for educational and thematic discussion. They're not delivering professional or personalized advice. Solo is not a law firm, does not offer legal representation and must not be relied upon as a substitute for professional legal counsel. It is also not engaged in debt, settlement, credit repair, or financial counseling services. Solo provides self-directed software tools designed to support users in navigating their own legal and financial situations. Participation in this podcast is not establish an attorney-client relationship. Listeners are encouraged to consult with attorneys or licensed professionals for guidance specific to their circumstances. The opinions expressed by podcast participants are their own and do not necessarily reflect the views or official positions of SoloSuit Inc. Doing business as Solo or any affiliated organizations.


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