Well if your credit is ruined, you have seven years before it is taken off your credit history. If you don't contact the debt company the debt you owe will be

Well if your credit is ruined, you have seven years before it is taken off your credit history. If you don't contact the debt company the debt you owe will be written off and the IRS will send you a 1099 form of the debt as income. So you will have $5000 added to your 1040 and taxed on it. If you do contact the debt company and make arrangements to pay you will be contacted by other debt companies as well. So that 1K down payment and $X month, the other debt companies will want a settlement as well. What you might want to do is contact a debt settlement company that can consolidate your debts into one monthly payment. Your credit rating is already ruined by owing debt and being sued. Contact a debt lawyer or debt consolidation company to reduce or consolidate the debt and make payments if you want to go that route. Owing debt and taxes is all too common in the software consultant area. Sometimes software consultants are stiffed by contracting companies, clients, brokers, etc and still have to pay taxes on income they earned but were not paid for. If they ask about your income changing, just tell them it was higher when you had more work and it adjusts to the market. Most credit card or debt companies don't care what you earn, as long as you make payments. They will eventually see your tax form and then make adjustments to your credit based on that. Debt collection companies, by the way, get your contact info from the IRS from what you put on your 1040 form. So whatever contact phone or contact postal address you list, they will contact you with that. Some people skip debt collection agencies by putting a PO box listed as an apartment or a phone number that is always busy or rings and rings and never is answered as their contact phone to keep debt collectors away. But you didn't hear that from me. :)