I am a single mom of four kids ages 3 to 8. Last night I got a call from someone to tell me that there is a government grant to help people like me (single parents) with my debt. He said I qualify for the money. I would have to only pay the grant a tiny bit for what I owe and the grant pays for the rest. I told him my credit cards are all closed, but I think I owe $5,000 anyway. He said I would only have to pay $1,000, but I have to do it by tomorrow. I'm worried because I can't afford that much, but I don't want to lose out on this deal. We are using the food bank and SNAP as it is. I have some student loan money left that I can use to pay the $1,000 — but I don't think this offer is real (even though I hope it is). – Olivia
Talk about a crazy, mixed-up mess of a pretend program. Your scam sense is right. Take a look at this report from the National Consumer League, and you'll see you're not the only one to get such a call. Whoever called you was not offering legitimate help, but trying to hook you on their fraud line.
A real grant is a cash gift or award. It's not a loan, and you never have to send money to receive it. Grants are given to people and organizations after an application process, too. Benefactors don't drop out of the sky! Yes, the government may provide them, but specifically to help single parents deal with their debt? Nope. Rather, such funds are usually for needy people for college tuition or to start up a business.
The man you spoke with was almost certainly referring to debt settlement. He might have been randomly cold-calling people on a list, ringing systematically until he hit on someone who was in a bad financial position. Not too hard these days, sadly. It's possible that he brought up the whole single parent thing because that's what you revealed. Such personal details would have been enough to get him on a roll with his story.
If you send a check to his “official” agency, the chances that the money would ever meet your creditors is slim to none.
So, you've escaped a scam, but that does still leave you with your predicament, though. I'd like you to fix it in a way that benefits you, not some crook.
Debt settlements can be a decent way of dealing with old bills — as long as you have the spare funds. You'd arrange a settlement with the creditor (usually a collection agency, which I think has your accounts now) directly. Together you'd negotiate a smaller sum. There are companies and law firms that can act as intermediaries, but they charge for the service. No matter what they may claim, they can't do anything for a fee that that you can't do for free. If you do go in this direction, know that you might have to pay income taxes on the forgiven amount if it's more than $600.
Still, I get the distinct impression that cash is so tight that sending even a fraction of what you owe may be too much of a burden. You're strapped as it is. Because you're relying on aid to provide food for your family, it would make more sense to use any of your precious dollars for essentials. As for student loans, that money should be used to cover or offset education costs.
Check the statute of limitations of debt for your state here. If your debts have passed that time frame, you're probably better off leaving them alone. You can't be sued for them anymore and, after seven years, they won't be listed on your credit reports either.
If the debts are young, your creditors can take you to court, so be careful. You may want to set up a payment plan or a debt settlement, but be sure to explain your situation. Tell them that you're on government assistance and (I assume) own few assets. If you don't have any valuable assets that can be seized, that makes you judgment proof, meaning that even if your creditors did decide to sue, there's nothing for them to claim. They may accept your terms because they're the best they can get.
Need more help? Go to a nonprofit credit counseling agency or free legal clinic. Don't return that guy's call, and if he contacts you again, tell him to stop or you'll report him to the authorities.
Got a question for Erica? Send her an email.