The Lesser of Two Evils

Dear Dave,

My husband and I are following your plan, and we’re on Baby Step 2. We just learned that the person who has done our taxes for the last three years made mistakes on all our returns. They were really nice and did our taxes for free, but now we owe back taxes in the amount of $18,000. Since we’re still paying off debt, the only savings we have is the $1,000 in our beginner emergency fund. Should we take out a personal loan to take care of this, or set up payments with the IRS?

Laura

Dear Laura,

I’m glad to hear you’re handling your finances better now than you did in the past. But at this point, you’re learning that old debts don’t necessarily die, aren’t you? Ignoring debts isn’t a good plan, because many times they come back to life like a zombie and come looking for you.

I’m not an expert on Florida law, but a pretrial conference in a case like this—over a $7,688 credit card bill—is highly unusual. I’ve been helping people with money problems for 30 years, and I’ve never heard of anything like this. It could be some kind of new tactic the collections attorney is using to try to intimidate you.

If I were in your shoes, I’d call the attorney who’s suing you and try to negotiate a payment plan or settlement. Do you have anything you can sell? Because I’ve got a feeling if you can come up with $3,000 or so and offer it as payment in full, they’ll take it. I don’t mean to be unkind, but these guys figure you’re a deadbeat because you’ve got a 5-year-old debt hanging over your head and haven’t tried to pay it. They’ll take almost anything they can get at this point.

In general, when you go to court over a situation like this, you’re going to lose. You have a legal debt, and you haven’t paid it. It’s that simple. So, if you don’t have anything to sell to make some money that way, you need to get busy working an extra job or two. I’m talking about doing Door Dash or something—in the morning before work or in the evening after work. Kiss those weekends goodbye too. Just go nuts for a few weeks, and make a bunch of extra money fast.

It won’t be easy, and you’re going to be dog-tired for a while. But you can scrape together $3,000–4,000 before June easily if you’ll just put your head down and make it happen. Then, offer it up to the attorney. Demand a written release, with the debt declared settled and paid in full, and chances are, this thing will be off your back!

- Dave