What is Debt Elimination ?

Debt elimination is the technique or process of getting out of debt by basically eliminating it. By elimination I mean that the end result is as if the debt was never there. Debt elimination does not involve payment plans or lower interest rates to help you get out of debt after paying thousands of dollars. Debt elimination means stopping payments immediately and disputing your debt in an effective way.

Many consumers feel that debt elimination is not an ethical option, or maybe they do not even know that it exists as an option. The fact of the matter is that your banker or creditor is the one that is participating in the unethical actions, not you as the debtor.

You are probably wondering how this can be when you signed a contract with your bank agreeing to pay. The truth is that your bank or creditor loaned you money that, previous to your transactions, did not exist at all. Banks can do this through a process called fractional banking. This process allows banks to lend out ten times more money than they currently have in their deposit accounts.

In a sense your bank has lent you money that never existed and are now pressuring you to pay them back with your money that you actually earned. This is wrong and is a major contributing factor to why our economy is so poor right now.

So why are banks doing this? Banks just like any other business are simply out to make as much money as possible. The thing that is different about banks is that they are giving you nothing in return. At lest when you shop at grocery store you pay money and get food or other needed products in return. When dealing with a bank they give you monopoly money and you have to pay them back with real money.

Banks do not want you to know these things. They want you to continue to believe that they have your best interests in mind and that they are your friends. My question is this, “Is it better to believe the banks or look at them as they really are?” My opinion is that you, as a consumer, need to see the banks as they really are in order to protect yourself from their tricks.

Because of all of the unethical practices that banks participate in, there are often holes in the contracts and obligations of debtors. These holes are what debt elimination exposes. With debt elimination you can prove that your creditor is trying to collect wrongfully on your account, thus releasing you from the terms of the agreement and making your alleged debt void.

Debt elimination does not and cannot come about from continuing to make payments to your creditor. The more you make payments the more pressure the bank will place on you to continue paying. Why? Because banks want more money! The instant you stop paying and start effectively disputing your debt, the banks will realize that you are not going to be an appealing target for their abuse.

Eliminating debt can be hard when you do not know what you are doing. I strongly suggest staying away from debt consolidation agencies or any company that is advertising a payment plan. Anything that involves making payments to a new collection agency is not debt elimination. Although it is good to be aware that debt elimination companies will charge a small fee for their services. However, this fee is quite different than the payments you are currently making in regards to your credit card.

Debt elimination is an option for most consumers today. It starts with the choice to be debt free and the choice to not let your creditor push you around anymore. Debt elimination can be a difficult path but it is much less difficult than making outrageous credit card payments for the rest of your life!

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Why Debt Validation Letters are so important ?

Have you ever heard of a debt validation letter? Most people who are in credit card debt have done some research online and come across articles that mention debt validation letters. These letters, if used properly, can provide a huge amount of protection to consumers with creditors trying to collect on their accounts. Debt validation letters are quite a bit different than debt verification letters. These two types of letters often are confused with each other, which can lead to problems later on in the collection process.  

                          

First lets discuss why debt validation letters are so important. To understand their importance we must first understand what the purposes of these letters are. The history of the credit card debt collection industry is not a very pretty one. It is riddled with stories of companies wrongfully attempting collections on people who never had taken out credit card debt in the first place. Over the years hundreds of thousands of dollars have been collected wrongfully and finally the government passed some legislation that put a stop to these illegal collection practices.

The legislation that was passed is known as the FDCPA or Fair Debt Collection Practices Act. This act requires any creditor or debt collector to validate to the debtor that they are collecting on the right account. Without the FDCPA, consumers would not have legal protection against wrongful collection efforts.

By sending properly written and timely debt validation letters to creditors or debt collectors that are trying to collect on your accounts, you can force them to provide validation. Without providing this validation, the efforts of the debt collector or creditor will have to be stopped unless they want to risk a federal lawsuit.

The problem with validating credit card debt is that if you do not request validation from your creditor or debt collector, they will not validate your account. In fact creditors and debt collectors will try to steer you clear of thinking that you can validate your account. This may seem odd to you that your bank or creditor would be intentionally deceptive to you as their client. Trust me, it happens all the time.

So why do creditors or debt collectors want to keep their clients away from validating their debt? Well to be honest, the majority of clients who are making payments on their credit card balances are doing so with no legal obligation. This might sound crazy to you but from a legal perspective it is absolutely true. Another interesting fact is that most debt collectors do not have the information that is required under the FDCPA to validate an account that they are attempting to collect on. Knowing this, if you are dealing with a third party debt collector, you need to send a debt validation letter immediately to free yourself from their collection efforts!

The question now is how can you become an expert at sending debt validation letters in order to protect your financial situations. The best way to gain this expertise is through the use of debt validation letter templates. By using well written and properly worded template letters, you can ensure that your creditor or debt collector will be required to validate all aspects of your debt or stop their collection efforts altogether.

Yes! I want to learn the secrets of How to Defeat Collection Agencies, Beat Junk Debt Collectors and Conquer Collection Attorneys with Powerful Debt Validation Letters!

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How to Dispute Debt ?

Oftentimes I have my readers and clients asking questions about how to dispute debt.  First of all, dispute simply means to disagree, argue, or debate something. Understanding this meaning, almost everyone who is in credit card or some other type of unsecured debt should always dispute the debt.

Knowing how to dispute debt effectively does take a bit more work than simply disagreeing that you owe your creditor or debt collector money. It takes proper steps and timing for it to be effective. What I mean by effective is that the majority of my readers and clients end up completely free of the debts that debt collectors or creditors are trying to get them to pay, or the settle for pennies on the dollar. If this sounds appealing to you in your current debt situation you definitely should keep reading.

One way to dispute a debt is by simply saying that you disagree or dispute the debt when you are on the phone with a creditor or debt collector. The problem with showing your disagreement this way is that it won’t protect you or build your case in the event that a creditor or debt collector tries to sue you. The creditor or debt collector will simply deny that you disputed the debt or will simply disregard your dispute altogether. Bottom line is that the creditor or debt collector’s actions and treatment of you will not change, or if it does change they will just get nastier.

Some credit counseling agencies, or similar types of companies, suggest sending debt verification letters. Debt verification letters require the debt collector to verify to you in writing that they have your correct name and address. In my opinion this is fairly pointless. When you think about sending a debt verification letter, your name and address will most likely be on the outside of the envelope you mail the letter in. That way anyone can rewrite your address and send it back to you and consider the debt verified.

The other problem with debt verification letters is that they offer you no legal protection. The do not stop creditors or debt collectors from calling you and harassing you about your account. They do not force the creditor or debt collector to produce actual account information that shows that you do in fact owe them money.

If you want to learn how to effectively dispute a debt you have come to the right place. The way to dispute a debt and get results can be done through the use of debt validation letters. The FDCPA or Fair Debt Collection Practices Act backs these letters. This Act requires creditors and debt collectors to back their collection claims with complete validation evidence on any account that the request for validation is made.

These validation letters also prohibit the debt collector from continuing collection efforts after a request has been made unless they validate the account completely. The best part about this is that rarely if ever do debt collectors have enough information to validate an account. Because debt collectors do not have the required information to validate, you can stop their collection efforts almost instantaneously in some cases with properly executed debt validation letters.

The best resource to learn more about how to draft and when to send debt validation letters is my free 10-part mini course offered through this website.

It will share all sorts of tips and tricks on how to dispute debt to make your journey through the debt validation process much more smooth and effective.

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How to Settle Credit Card Debt ?

Settlement or legally not making any sort of payment on your disputed account is what we are trying to help you accomplish. In many cases, you can get your creditor to agree to a settlement with you for a fraction of the alleged amount that you owe. Getting to this point is not extremely difficult, but does require some knowledge in regards to how to settle credit card debt and the  importance of a well written debt validation letter. This knowledge is supplied in full in the eBook that is available to you on this site.

The first thing to be aware of is that debt settlement or a course on how to settle credit card debt does not always give you the financial freedom you desire. Granted, it can be a lot better than the situation that you are currently in, but it is usually not the best possible outcome. Let me share with you why. Settling a credit card debt can often result in what is referred to as 1099 imputed income tax. This means that the IRS will tax you for the amount that you did not pay to your creditor.

For example, let’s say that your credit card debt is $100,000. You have been fighting the debt for a while and your creditor finally offers you a settlement for 25% of the debt you currently owe. At first glance, $25,000 sounds a lot better than $100,000 and I am not going to say that it isn’t a lot better! However, because of the 1099 imputed income tax, you will then owe the Federal Government taxes on the $75,000 you did not pay. I am sure you can see that this can be quite a significant amount.

Another thing you must understand if you are trying to get your creditor to agree to a settlement is that for your creditor to agree to settle, they must see your account as uncollectable. Sending well timed and well drafted debt validation letters can show your bank that you are not going to be pushed around. This will make you significantly less desirable in their eyes in regards to your supposed debt.

Banks and creditors only want to make as much money from you as possible. That is why continuing to pay on their terms without forcing them to validate your debt can be a huge mistake. In my free mini course you can learn a lot more about what your rights are as a debtor when dealing with your creditor. This knowledge, along with the use of debt validation letters, can save you hundreds and even thousands of dollars throughout the collection process.

You may be wondering what a reasonable settlement amount is to negotiate for with your creditor. This depends on a few different factors. However, the settlement amount you should be targeting is probably much lower than you are thinking. With the knowledge gained from reading my eBook, you can easily set yourself up for a settlement in the 5% – 20% range. A settlement of this amount is absolutely reasonable. These types of settlements happen often when a creditor has been cutting corners and the debtor forces them to validate by using debt validation letters.

After all that being said about debt settlement and how to settle credit card debt, if you follow the right steps you can, in most cases, be free of your debt even without settlement. That is right, no settlement! What I am trying to teach people all around the country is how to avoid unreasonable collections and debt settlement altogether. By following the steps I will provide for you, this will become a reality in less time than you think!

The best place to start learning about this process is my free 10-day mini course. By singing up you will receive a brief yet comprehensive email each day on a different topic of the debt collection and validation process. These mini course lessons will provide you a wonderful foundation for understanding the collection and debt validation process!

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How Much Does it Really Cost to Get Out of Debt ?

How Much Does it Really Cost to Get Out of Debt?

Many people will confuse the difference between the Price and the Cost of a particular debt resolution option. You can only make a fair comparison of the various options after you fully understand what makes up the Price and what makes up the Cost of something. You may be thinking, ―But aren‘t they the same thing? They are actually very different and once you understand the difference, you are on your way to saving thousands of dollars when resolving and paying off your debt.

The Price of something is only a figure, or a number, to establish relative worth. This is like the sticker Price of a car. The Cost is the actual amount of money you have to take out of your pocket to actually own the product or pay for the service. This is like the total of monthly payments on a car loan versus the purchase Price of the vehicle.

For example, let‘s say that the sticker Price of a particular new car is $30,000. After discounts and rebates, the final Price the customer pays is, say $25,000. Add sales tax, license, dealer fees, etc. and the final Price is now $27,000. The customer puts $1,000 down, finances the remaining $26,000 at 9% for 60 months, and drives away thinking he just bought a car for a Price of $27,000 (at least that is what he tells his friends!)

We now know the actual final Price - $27,000 – but what was the Cost? The $1,000 down plus 60 payments at $540 ($26,000 principal balance at 9% for 60 payments), equals a total Real Cost of $33,400. The difference between the $27,000 Price and the amount paid of $33,400 is the difference between the Price and the Cost. In other words, the Cost was actually 20% higher than the Price!

From that illustration you can see that if you have to pay for something over time, with any sort of interest or charges added, the total amount you have to take out of your pocket to pay for it will always exceed the initial purchase Price. The higher the interest, or the longer the time you have to make payments, the more the Cost will exceed the Price.

Now that you better understand the difference between the Price and the Cost of something, we can evaluate the true cost of various debt resolution options. Remember, people want the lowest Cost option, but usually buy what they think is the lowest Price option. As demonstrated earlier, Price should not be the determining factor in making a buying decision – it should instead be the total Real Cost.

The Bankruptcy Option

Bankruptcy may seem like the only way out of some situations, but you should consider what it will cost you. Sometimes, these costs will lead you to look for another solution.

You will need to consider more than just the costs for filing the bankruptcy. You will pay the filing fees and most likely need a lawyer. These filing fees have gone up as part of the Deficit Reduction Act. The filing fees were $200 for a Chapter 7 and $185 for a Chapter 13 filing, and have now gone up to $299 and $273 respectively.

If you make changes to your case or proposals for added actions, you will pay more. And you will have to avoid missing records and writing bad checks to keep from adding to the bill.

In general, just filing for bankruptcy can cost you in nine ways:

1. Attorney fees

2. Credit counseling

3. Petition fees

4. Amendment fees

5. Reopening fees

6. Conversion from a Chapter 7 to a Chapter 13

7. Splitting fees

8. Abandonment of property costs

9. Withdrawing the reference fees

But you will pay much more than just for those items. For the next decade you will pay higher interest rates on any loans you are able to secure. If you want to buy a home, you will probably have to shop the subprime market, which automatically means higher interest rates.

You will also pay higher insurance premiums as insurance companies look to your credit history for the potential of claims by you. The worse your credit, the more likely you are to have a claim and the higher your premiums.

You may have to sell your existing home, cars and belongings to settle your debts. You may find that even after your debt obligations are fulfilled and your credit history is on the way to repair, you will still be unable to secure credit from your previous lenders. They keep the information on file for ten years from the time the bankruptcy is discharged, not from when it is filed.

Bankruptcy isn't something to be taken lightly. It will cost you a lot of money and lost sleep. If you are able to find a way to avoid it, you should. Under the new law, you will have to attend credit counseling to be able to file for bankruptcy. You will have to pay for this, usually $50 a session.

You are not required to have an attorney represent you, but the paperwork can be overwhelming if you are not familiar with all the legal terms and requirements. There can be a broad range of fees for attorney services, but you can expect to spend at least $500 for competent legal counsel.

Generally, the total fees for the filing itself, credit counseling, and attorney fees can run anywhere from $700 to $2,000. If you shop around, you should be able to cover all the costs for about $1,000.

But of course just paying the costs does not get you out of debt – not by a long shot. If you are forced into a Chapter 13 filing, you will also have to pay your creditors back for somewhere between 40 and 60 cents on the dollar typically, plus Trustee fees.

Bankruptcy is something that is hard to recover from, both emotionally and financially. So look at bankruptcy not as a way to start over, but a long pause in your life. Everything will change. You should try to avoid it. The total Cost of bankruptcy is just too much to be a temporary fix for your problems.

The Debt Settlement Option

The debt settlement industry is one of the hottest and fastest growing industries in the country right now. So many people are over extended on credit card and other unsecured debt that any solution can seem attractive. But what does it really cost to get out of debt using this option? Virtually all of the ads for this type of service tout savings of 40-60% off your current balance, with most quotes being for 50% plus the fees to the debt settlement company.

Although there is some variation on the costs associated with this option, we will use the most common pricing model being sold nationwide. The most typical program calculates repaying the debt for 50% of the original amount, plus a fee of 15% of the total debt. Using this as a starting point, we can do some calculations to determine the true Cost of this option.

For example, if you had total credit card debt of $40,000, you would be expected to pay $20,000 to your creditors and $6,000 to the debt settlement company, for a total of $26,000 paid over four years with a monthly payment of about $540. However, there are more fees associated with this option. The first is the monthly account maintenance fee that debt settlement companies charge. The typical fee is $40 per month, which would total another $1,920 in cost over the 48 months of the program.

There is one more cost that the debt settlement companies rarely mention, and that is the imputed income tax we discussed earlier. Debt settlement companies negotiate with the primary creditor and they are required to file a 1099-C for any forgiven debt. If you are in the 15% tax bracket, you would owe income taxes on the $20,000 in forgiven debt, or $3,000.

Now we can add up the total cost of getting out of debt using this option. The amount to the creditors plus the fees is $26,000, plus the monthly fees of another $1,920, and the taxes of $3,000 totals $30,920, or 77% of the original debt and would require payments for the next four years.

The Debt Consolidation Option

Due to dropping real estate values, this option has lost popularity in recent years but is still available as an option to some people. Although the low monthly payments available under this option can appear attractive, don‘t be fooled by this one – it is by far the most expensive option to get out of debt.

Since this is a one hundred cents on the dollar option, you would have to borrow $40,000 plus pay closing costs of about $1,200, for a total loan of $41,200 to be paid back at 9.5% interest over the next 15 years. This option would have a monthly payment of about $431, but it would last for a full 15 years, or 180 payments. The total amount paid back would be the $41,200 principal plus interest of $36,240 for a total amount of $77,440, or 194% of the original debt!

But wait. What about the interest deduction on the home equity loan? Based on a total interest payment of $36,240 and again assuming a 15% federal tax bracket, you would save a total of about $5,436 in taxes over the 15 years. Even if we subtract this amount from the total paid you would still end up paying $72,004 back on $40,000 in credit card debt – not a very good deal at all.

The Credit Counseling Option

This is another popular, and expensive, option to get out of debt. Basically there is no attempt made to reduce the principal balance, only to negotiate more favorable interest rates and perhaps lower minimum payments. The typical program takes 60 months to get out of debt and you will end up paying back more than the total current debt.

Using our earlier figure of $40,000 in credit card debt paying 18% interest and making payments of $1,200 a month we can see how the costs come out under a credit counseling program. You could possibly get the interest rate reduced to an average of 10% and set up a payment plan for 60 months. Using a credit card debt calculator we can determine that you would now be paying $850 a month and a total interest of $10,993. The total of payments and interest then would be $50,993 to be debt free in five years.

Asset Protection and Debt Resolution

The final option we will review when considering the true Cost to get out of debt is asset protection and debt resolution. There are variables that determine the actual cost of this option but we will use the following assumptions: You are current on your credit card debt; have some available credit left on your cards; can afford to make small monthly payments; and live in a state where wages can be garnished.

Using the same $40,000 in current debt from our earlier examples, we can determine that this is by far the lowest cost option, and the quickest, to get out of debt. It will also have the least long-term impact on your credit scores. At this debt level, the total cost to get out of debt, including the fee for the program, for a couple is less than 40 cents on the dollar. And the best part is, the entire program can be completed in about 18 months – faster than any other option available. Because of the leverage this type of program provides, you can expect to negotiate and pay off your debts for around 20 cents on the dollar and the balance will be in program fees.

Asset Protection and Debt Resolution would allow you to hold your creditors at bay while you accumulate enough funds to pay your creditors off at a substantial discount. You should expect to spend a total of around $15,000 to become debt free using this process – a fraction of the cost of any other option we have discussed.

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Debt Settlement Guide

Debt Settlement

The next method for dealing with debt is known as debt settlement, or also called debt negotiation. In the simplest terms, a debt settlement company works with a debtor to help negotiate a settlement with the credit card companies for less than the full amount owed – usually around 50 percent of the original amount. Although this may result in a reduction of monthly payments and an overall lower balance, anyone using this method will still pay back a significant portion of his or her debts.

There are some benefits to this approach for those struggling to make credit card or other unsecured debt payments:

5 Benefits of debt settlement (or credit card debt settlement)

1. Avoid bankruptcy: With debt settlements, you can reduce your debt burden and pay off bills at a monthly payment that is usually lower than you are currently paying. The debt settlement company will negotiate with the creditors or collection agency (CA) and offer to settle your debts for as much as you can afford to pay. Thus, you don't need to file Chapter 7 or Chapter 13 bankruptcy if you can afford to make some sort of monthly payment towards your debts.

2. Single payment: Instead of paying multiple bills each month, you'll have to make a single monthly payment to the settlement company. The monthly payments are accumulated in a trust account in order to be paid to your creditors/CA after negotiation. So, you can avoid the stress of paying debts at different rates and dealing with several creditors at a time.

3. Avoid unfair collection practices: You can avoid unfair collection practices and harassment by debt collectors if you negotiate a settlement.

4. Eliminate extra charges: The settlement company can try and eliminate late payment fees, if any. Any over-the-limit fees on credit cards can also be minimized or eliminated by way of settlement.

5. Get out of debt quicker: In a settlement arrangement, you may be able to get out of debt in three to five years if you keep your payments current.

However, there is a dark side to debt settlement. Many of these negotiated amounts will appear on your credit report as a settled debt rather than paid in full. A settled debt is a black mark on a credit report and will pull your score down for years.

At the time of settlement, if you fail to get a written statement from the creditor that you no longer owe anything on the debt, they may sell the remainder to another collection agency. In addition, any savings are reportable to the Internal Revenue Service (IRS) as forgiven debt, which is considered a form of income. Collection agencies and creditors are required to submit a Form 1099-C to the IRS to report any forgiven debt of $600 or greater. Most debt settlement or debt negotiation companies will fail to inform you of this potential tax liability.

If you seek the aid of a debt settlement company, be very careful because you may have even more problems than you started with. Debt settlement companies charge substantial up-front fees, often charge monthly fees and send nothing to your creditors until you have accumulated enough to settle. At that point, they even take a portion of the forgiven debt as a fee.

Once your debts have accumulated additional interest over time, and factoring in the increased taxes you must pay on forgiven debt, you really are not saving much money at all. Debt settlement companies cannot do anything more than you can do on your own. If you can save money for a settlement and negotiate a settlement amount, then you can settle your own debts without the assistance of a debt settlement company.

If you still think you want to hire a debt settlement company, consider the negative ratings of debt settlement companies as well as the warnings from top regulators against dealing with debt settlement companies:

New York Attorney General Andrew Cuomo‘s office recently advised that ―many consumers would be more successful working directly with their creditors. Debt settlement is sometimes an imperfect option when you handle it yourself, but it rarely is worth it to hire a company that claims to settle your debt for you. The consequences (fees, judgments and ruined credit) are just too severe. The truth is that creditors have no legal obligation to settle. Creditors despise debt settlement companies because they actually reduce the amount of money that they typically receive from debtors that have defaulted on debt.

Traditional Debt Settlement Does Not Work

There used to be about 20 debt settlement companies in the United States. There are now closer to 2,000. They sprang up after the federal law changed in 2005, making it harder to qualify for bankruptcy, and they have proliferated in this down economy. ABC News reported that debt settlement customers are furious that their bills grew while enrolled in a settlement program. Most quit the programs without having a single debt settled. - July 24th, 2009

In the course of their investigation the reporter wrote:

―We visited Credit Solutions of America, the largest debt settlement company in the country. At its Dallas-area headquarters, we saw employees ringing bells and cheering every time they persuaded a credit card company to settle somebody's debt for less than what they owed. When we visited with our cameras, the noise was deafening. But thousands of unhappy customers have complained about the company.

―(A customer named Karen) Moore signed up, and said that the first thing Credit Solutions told her to do was stop paying her credit card bills, which, according to a study by the National Consumer Law Center, is standard advice in the debt settlement world. Instead, Moore said the company told her to save a chunk of money that could be used to make an offer to the credit card companies to settle her debts once and for all.

But that savings account didn't accrue fast enough, Moore said, because, in the meantime, Credit Solutions was automatically deducting its own fee -- 15 percent of Moore's total debt -- from her account. In the first three months, the company deducted roughly a third of the fee from her bank account and then the ensuing balance over the course of the next 14 months.

Moore remained in the Credit Solutions program for 20 months, and paid the company's full 15 percent fee, yet Credit Solutions did not initiate a single debt settlement for her. And because she wasn't paying her credit card bills, the late fees and penalties piled up, causing her debt to soar from $13,000 to $18,000. Meanwhile, her credit score plunged. "I'm out of pocket $2,088," Moore said. "And nothing to show for it." She said it's money she could not afford to lose given that she was in debt in the first place. "Absolutely not. Who can afford to lose money?" she said.

While the ads and sales pitches for debt settlement sound good and give many people who are buried in credit card debt some hope, it is a false hope. While they all tout the ability to reduce debts by 50% or more, reduce your monthly payments and get you out of debt quickly, the reality is far less rosy. The preceding story is not an isolated incident; in fact it reflects the reality of most debt settlement programs.

The Inside Story

The basic strategy these firms employ is to instruct consumers to stop paying creditors once they join the program. Instead, they are told to save money in a separate account that will be used to make a settlement offer at some point in the future. After receiving nothing for many months, the settlement companies say, lenders will be happy to take a lump sum payment for far less than the total debt. Sometimes it works but again the creditors are under no obligation to accept a reduced settlement amount and if they can‘t get payments can seek legal remedies such as lawsuit.

The problem for consumers is that high up-front fees -- and additional monthly fees -- often mean they have very little to offer creditors after six months or a year in the program.

Big Fees, Small Benefits

Hardy, the former debt settlement worker, said debt settlement companies rack up charges against consumers in numerous ways. For example, he said, while the money saved for eventual debt repayment is held in an outside bank account, there are often fees associated with that. These companies typically charge a monthly service fee of $20 to $40 on these bank accounts for doing absolutely nothing. After all the fees are added up, there's often very little benefit to the consumer -- even if the credit card company agrees to a 50-cents-on-the-dollar offer, he explained. A consumer with $10,000 in debt would eventually pay nearly $4,200 in fees by the time commissions; up-front charges and bank account charges are added in. After paying $5,000 to the creditor, the consumer‘s savings amount to only about $800, he said. And don‘t forget the imputed income tax that the IRS will assess on the $5,000 in debt forgiveness – at a 15% tax bracket that is another $750 reducing the real savings down to only $50!

A typical debt settlement ad promises much but in truth they will deliver very little. Don‘t be fooled by these types of offers – you will only enrich them and will be no better off, or perhaps even worse off, than you were before.

New Regulations for Debt Settlement Companies

Due to the abuses that have been rampant in the debt settlement industry, the Federal Trade Commission has taken action to clamp down on many of the practices we have just discussed by issuing amendments to the Telemarketing Sales Rule. Starting on October 27, 2010, for-profit companies that sell debt relief services over the telephone may no longer charge a fee before they settle or reduce a customer‘s credit card or other unsecured debt.

The Federal Trade Commission announced on July 29, 2010 that the new restrictions are a crack down on the debt settlement industry, which flourished during the economic downturn as borrowers struggled to pay bills. Debt settlement companies will now only be able to charge a fee once a customer's debt has been reduced, settled or renegotiated. ―At the FTC we strive every day to make sure America‘s middle class families get straight deals for their dollars, Chairman Jon Leibowitz said. ―This rule will stop companies who offer consumers false promises of reducing credit card debts by half or more in exchange for large, up-front fees. Too many of these companies pick the last dollar out of consumers‘ pockets – and far from leaving them better off, push them deeper into debt, even bankruptcy.

Since the start of the recession, the Better Business Bureau has received more than 3,500 complaints about debt settlement companies. Customers complained that they ended up deeper in debt or were sued by creditors after failing to make payments. The bureau did not separately track complaints against the industry prior to the recession.

Debt settlement companies often charge an upfront fee, typically a percentage of the customer's outstanding balance. In exchange, the company promises to negotiate with creditors to reduce or eliminate the debt, sometimes by as much as half.

The new FTC regulations also require debt settlement companies to disclose to customers how long it will take to get results, how much it will cost, and any negative consequences that could arise from the process.

Specifically, the three other Telemarketing Sales Rule provisions to take effect on September 27, 2010, will:

- require debt relief companies to make specific disclosures to consumers;

- prohibit them from making misrepresentations; and

- extend the Telemarketing Sales Rule to cover calls consumers make to these firms in response to debt relief advertising.

For example, debt settlement companies will now have to inform customers that they can go deeper into debt when they hire a debt settlement company. This is because customers stop making payments on their loans, and late fees and interest charges continue piling up.

Customers are also often required to start setting aside money in a separate account maintained by the debt settlement company. This money is intended to eventually pay off any remaining debt Under the new rule, however, companies will only be able to require such an account if it's maintained at an independent financial institution under a customer's name. The customer must also be able to withdraw the money at any time without penalty.

The amendments to the FTC's telemarketing sales rule apply to any debt relief companies that sell services over the phone. They do not apply if the initial contact is in person, or if the services are rendered entirely online.

The new rule will cover the vast majority of the debt settlement industry, however, because most companies use TV and radio ads to advertise toll-free phone numbers for customers to call, said Allison Brown, an attorney with the FTC.

The Final Rule covers telemarketers of for-profit debt relief services, including credit counseling, debt settlement, and debt negotiation services. The Final Rule does not cover nonprofit firms, but does cover companies that falsely claim nonprofit status. Over the past decade, the FTC and state enforcers have brought a combined 259 cases to stop deceptive and abusive practices by debt relief providers that have targeted consumers in financial distress. Click here to continue reading on Debt Settlement...

Bankruptcy

Bankruptcy

First, it is important to understand what a bankruptcy is and how the process works. From a historical perspective, Article I, Section 8, of the United States Constitution authorizes Congress to enact "uniform Laws on the subject of Bankruptcies." Under this grant of authority, Congress enacted the "Bankruptcy Code" in 1978. The Bankruptcy Code, which is codified as title 11 of the United States Code, has been amended several times since its enactment. It is the uniform federal law that governs all bankruptcy cases. 

The procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the "Bankruptcy Rules") and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases. The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses. 

There are two basic types of bankruptcy filing available for individual debtors (as opposed to business or corporate filings), known as Chapter 7 and Chapter 13. A basic description of each is that a Chapter 7 bankruptcy discharges the debt and there is no repayment, whereas a Chapter 13 has some sort of repayment provision. 

A Chapter 7 bankruptcy is also known as a Liquidation bankruptcy and it contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor's estate, reduces them to cash, and makes distributions to creditors, subject to the debtor's right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most Chapter 7 cases, there may not be an actual liquidation of the debtor's assets. These cases are called "no-asset cases." A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most Chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed. 

A Chapter 13 bankruptcy, on the other hand, is known as an Adjustment of Debts and is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to Chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a "plan" to repay creditors over time – usually three to five years. At a confirmation hearing, the court either approves or disapproves the debtor's repayment plan, depending on whether it meets the Bankruptcy Code's requirements for confirmation. Chapter 13 is very different from Chapter 7 since the Chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor's anticipated income over the life of the plan. Unlike Chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under Chapter 13 than the discharge under Chapter 7. 

In the past, when someone got in over their head in unsecured debt (debt not tied directly to an asset like a car or home) they could file a Chapter 7 bankruptcy if they had few assets and the court would basically allow them discharge all of their debt and start over fresh. Of course the credit card companies complained bitterly about this practice of legally getting out of paying them. After extensive lobbying and protesting to Congress, in 2005 they got their way and the bankruptcy laws were amended in favor of the credit card companies. 

Consequently, we have had harsher bankruptcy laws since then. During President Bush‘s administration it became more difficult for individual consumers to seek bankruptcy relief. The 2005 Bankruptcy Reform Act became effective on October 17, 2005. Thereafter, consumer filings plummeted. There were several key provisions in the Act that precipitated this decline in filings, the primary one being what is called the ―Means Test.

The following excerpts from a November 2006 article in The CPA Journal puts a professional perspective on the new rules and how they were expected to affect bankruptcy filings subsequent to the passage of the Act. 

The Bankruptcy Reform Act of 2005: A New Landscape 

By Roxane DeLaurell and Robert Rouse 

NOVEMBER 2006 - The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the Act) was signed into law on April 20, 2005, (Note: it became effective 180 days later on October 17, 2005) with the explicit intent of discouraging filings under the Bankruptcy Code. As a result, assumptions about filing for bankruptcy, unchanged in U.S. law for more than 25 years, are likely to be challenged. 

Not only was the Act highly debated, but all stakeholders also argued that the final version could have accomplished more. Whether the Act will achieve the goal of reducing bankruptcy filings is as yet unknown, but it should be noted that a previous attempt to reduce bankruptcy filings, the 1984 Amendments to the Bankruptcy Code, actually produced a threefold increase in such filings. 

It is apparent, however, that federal legislators had come to believe that filing for bankruptcy was no longer considered a stigma to be avoided, but rather had evolved into an attractive alternative to fully repaying one’s creditors. In fact, some commentators argued that the Bankruptcy Code had become a means to elude creditors and escape unwanted financial obligations, hence the need for a change in the law. The 2005 Act provided for some major changes in the Bankruptcy Code, and CPAs should examine it carefully when dealing with parties in bankruptcy. 

The bulk of indebtedness held by individuals increasingly consists of credit card debt, which carries high rates of interest and is generally short term in nature and unsecured by interests in the property of the borrower. The Act creates new responsibilities and new liabilities for the debtor/assisted person A major reform of the Act was an increase in the responsibilities of individuals seeking Chapter 7 liquidation. Persons who have little or no equity in any assets and who have mostly unsecured debt usually undertake such filings. While it has always been the case that creditors must show documentation of indebtedness—―proof of claim‖—it is now incumbent upon the debtor to demonstrate that there is no reasonable alternative to the bankruptcy process. 

The result has produced a shifting of the burden of documentation from creditors to debtors. The debtor seeking liquidation must now prove an inability to pay his debts as they are due and demonstrate a good-faith attempt to resolve such a crisis without the court’s help. 

Means Testing 

As mentioned earlier, the change in the Bankruptcy Code resulted in the creation of a debtor unfriendly ―means test for eligibility to file under Chapter 7. No longer could a person just file and eliminate unsecured debt. The Act requires a comparison of the debtor‘s income to the median income in the individual‘s home state. If the debtor‘s income is above the median and he is able to pay at least a minimal amount per month to creditors, he is not eligible to file Chapter 7 and must be so informed by any ―debt relief agency or legal counsel he has consulted about bankruptcy. 

More specifically, the Act requires that if a debtor's average gross family income 6 months before the bankruptcy filing exceeds the median for families in the debtor's state, the debtor's income and expenses must meet the means test. If the income and expenses do not meet the means test, the debtor must file a Chapter 13 bankruptcy rather than a Chapter 7 bankruptcy. An examination of these new rules makes it clear that the intent is to force as many people as possible into Chapter 13 (repayment) and make it much more difficult to just walk away from the debt. Obviously, the original intent of bankruptcy laws has been usurped and new rules favorable to the creditors have been put in their place.

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The Asset Guard

The Asset Guard™


Overview

The Asset Guard™ is a critical piece to not only more successful negotiations but to asset protection and lawsuit protection and prevention.  The easiest way to demonstrate its effectiveness is by comparison.  Let's use an example of a similar tool know as a home mortgage.  If someone were to sue you and find out you have a home that is paid off, free and clear, especially an investment property, this asset would be fair game for the suit and would be at risk.  If the home is mortgaged to the hilt, the appeal is largely lost as someone else already has first position.  The equity is the only thing available to consider as an asset. Although in this case, there is no equity, therefore no asset.  If a suit is won and the home included, a new lien would be placed on the home behind the other liens which in many cases is entirely noncollectable as the home equity is claimed in its entirety by the first mortgage.  The odds of someone even bothering for this position are decreased greatly as it is costly and worthless. Now, even if they do obtain a lien on your home, with the first and others before it, it may be deemed noncollectable and therefore worthless.  

Back to the Asset Guard... In our program, you will enter into a service contract with a related company that will assist you in rebuilding credit during and upon completion of the process.  This service is included in the program.  Due to the "high risk" you may pose as your credit decreases, a lien will be placed on your personal name in the form of a UCC filing with the state of personal residence.  This will encompass all assets, including bank accounts and will remain until fulfillment of the contractual obligations.  You will control this as you have the claim to contract fulfillment in your possession from the time we file the UCC.  The contract is considered fulfilled when payment is received for services provided which is always maintained current, allowing for a "rolling" contract that can be terminated and considered complete at any time.  You will have complete control over this, even if something were to happen to our companies.  

Negotiation Strength

The Asset Guard, when in place, will act as a "first position" on any assets left free and clear as well as first in line behind any secured liens already in place (such as your mortgage; these will have first right as they were in place first and are directly secured).  This requires unsecured creditors to fall behind the Guard in the event they pursue a law suit and win a judgment (which is a risk even in debt settlement and other options). It is also public record such that when a creditor is researching your name, they will likely find the Asset Guard and be forced to consider it in their decisions to pursue legal actions or submit to more favorable negotiations.  This greatly decreases the likelihood of lawsuit while giving protection even if a judgment is reached, a protection no other options offer.  

With the Asset Guard in place, you put yourself in a position to control the best negotiation tactic available to you, which is TIME.  With the Asset Guard in place you can better control the time frame of payment on the account. The longer amount of time that has passed the less the debt is worth to the creditor.  If you can push your creditors off for a year the debt will become almost worthless to a creditor.

What does this have to do with the Asset Guard? Only when the debt is worth pennies on the dollar to the creditor will the debtor have the chance to settled for pennies on the dollar.  After all the accounts have been negotiated and settled on the debtors terms should a debtor consider lifting the Asset Guard.

Asset Protection

Asset protection is another important function of the Asset Guard.  When in place, creditors cannot consider pursuing recourse through acquisition of "security" (liening property, wage garnishment) without paying off the Asset Guard which is substantial enough to not be considered worthwhile.  Even if paid off, this would be an even more favorable outcome.  Your assets or income can no longer be considered, requiring the creditor to focus on the account itself versus pursuing assets that were never considered part of the agreement.  This allows you to maintain valuable assets to continue caring for your family and personal self and gives you the ability to continue life while working through the financial issues as well as hit the ground running when completed.       

Some Important Details

For the Asset Guard to be valid as protection, it must be entered into with unrelated 3rd parties, i.e. not family, friends, business partners, etc.  A binding contractual obligation must be entered into with a proper security agreement outlining where valid consideration is offered and accepted between each party.  Our program offers the related service agreement required for the Asset Guard protection and with our understanding of contract law and state UCC regulations, we are able to properly enact this protection and allow you to rest assure that you are taking control of your financial situation with an experienced team of professional consultants.  Learn more and continue reading ...

Find out more about the Asset Guard process and exactly what you have to do and how it works to make you Judgement Proof.

If you have any questions, feel free to contact us @ 1-800-871-6817.

Asset Protection

Asset Protection in various forms has been used for many years by wealthy individuals to protect their assets from lawsuits and judgments. The concept itself is well tested but the application of it in helping resolve credit card and other unsecured debt is a fairly recent development. Most of the strategies used by the wealthy, such as offshore corporations, asset protection trusts, foreign bank accounts, and Nevada LLCs are neither practical nor necessary to deal with existing debt. Protecting your assets from creditors and using that protection to create leverage to negotiate a favorable settlement is all you really need.

The best asset protection strategies act as the walls between your assets and overzealous creditors and collection agencies. It is too late if you act to protect your assets after a lawsuit is filed or a judgment has been granted by the courts. That would be like trying to buy homeowners insurance while your house is on fire! Therefore, it is better to consider a well-structured asset protection strategy in advance of your creditors initiating any sort of legal action against you. Asset protection strategies should be implemented while you are still current or nearly current on your debts.

So what would an ideal asset protection strategy designed to protect you from the collection actions of creditors look like? There are several key components that would need to be in place to create an effective guard around your assets and hold your creditors at bay. All of the shortcomings of other debt relief options  would have to be overcome and it would have to be affordable for the average person with $10,000 or more in credit card debt.

With that in mind, we could specify that such a program should:

 Shelter your liquid assets like checking or savings accounts from creditor collection procedures.

 Allow you to immediately stop making payments to credit card companies without fright of lawsuits or judgments.

 Block your wages from garnishment.

 Provide access to resources and information to help you protect yourself and your assets from unwanted creditors.

 Allow you to redirect collection phone calls to an answering service that would not give out any personal information.

 Provide a reply service to creditors seeking payment that would permit you to exercise all of your legal rights under the Fair Debt Collection Practices Act.

 Provide leverage to allow you to negotiate debt down to around fifteen or twenty cents on the dollar.

 Help you access appropriate means to restore your credit score before or after you have settled with creditors.

 Provide information on how to negotiate with collection agencies to avoid having them issue a 1099-C for the imputed income.

 Provide 24/7 access to customer service for questions or to deal with concerns.

 Provide drafted responses to creditors who threaten legal action.

 Accept credit cards as payment for services provided.

 Offer payment options that allow you to pay as you go if you have no available credit.

As you can see we provide a comprehensive program of asset protection and creditor deterrence that facilitates a favorable debt resolution for the debtor. A key component to our program is its ability to deter creditors from pursuing collection actions. All creditors have a certain method and procedure they follow to attempt to collect delinquent debts and our system complicates that process and reduces their effectiveness and increases their costs. This often makes the account too difficult to pursue and the creditor ultimately gives up, moves on to the next case, and sells the uncollectable account to someone else.

Unlike debt settlement, that tries to negotiate a payoff for some amount less than the original debt with the original creditor, our debt resolution forces accounts into collection. Since the original creditors are blocked from taking the usual legal recourse to collect, they will sell off the debt to a collection agency as part of a large block of other delinquent debts. You should know that the debt collectors don‘t have to collect on every debt in order to make a significant profit.

Armed with this knowledge, our system thwarts any attempt by a creditor to take your money, and puts you in a much stronger position to negotiate a pay off your debts for much less than using any other method of debt resolution. Basically, if they can‘t take your money, they have to take what you are willing to give them. Now that you know the rules are different when dealing with a collection agency, and that they only have about five cents on the dollar into your account, you can use that to your advantage.

Offering a collection agency ten cents on the dollar actually gives them an exit strategy by getting something for their trouble, and in reality they have still doubled their investment in your account! Any prudent business would rather get something, even if it were far less than they had anticipated, than nothing at all. Of course this type of settlement can only come when you have sufficient leverage to force them to take such a settlement offer. It is the asset protection part of the program that provides this leverage and it must be done right to pass scrutiny.

Everything you will need to Eliminate Debt is in our Opt-in Letter. Simply Enter your Information Below to Grab Your Report!