Debt Settlement Breeds the Un-dead

If you are new to the blog, click HERE to start at the beginning of my story.
POST #25
It was Monday 12/28.
Like so many days during the past 2 weeks, I woke up and said to myself, “This is the day!!!!”
I hit the phone, called the rep and was ready to cut a deal. I had prepared for this day in a zillion different ways – not the least of which was borrowing money from my retirement account.
Everyone says to NEVER EVER touch your retirement account. Between taxes and early withdrawal fees, you can get killed. This is true. But in my case, a killer settlement on $100K would far out weigh the downside of pulling from retirement. It was a good decision both financially and psychologically. This may not be true for most people, but I knew it to be true for me.
Back to the phone call……
I dialed the number and sure enough, got the rep on the phone…..soooooo close.
Thankfully, he remembered me and my case.

Simulated view of a black hole in front of the...
Image via Wikipedia

Unfortunately, my account was still in the collections black hole I call:
DEBT SETTLEMENT PURGATORY.
I really did feel like one of the undead. My CRN coach had prepared me in so many ways.

  • Be patient.

  • Stay focused.

  • Keep consistent.

But never did she mention that I would be the caretaker for a zombie account roaming the debt world in search of a home. At this point, hell, bankruptcy, seemed like it would be a relief. At least I would know where I was!
I just wanted these accounts to be killed. I actually had empathy for the zombies from those cult films.

A participant of a
Image via Wikipedia

The rep told me to call back the next day.

December 29, 2009

………..Still a zombie.
….and the next day…..still no luck. In fact, I was told my account was frozen. It would definitely not be released to the Recovery Department until January 1st or 2nd of 2010.

Somebody kill me!!!!!!!!!

It was December 30, 2009. If I was to benefit from the timing of the last day of the last month of the year…..I had one more day to do it.
I prayed to the zombies of purgatory to take pity on me. Delivery me from this fire!
Just like a good horror film, we’ll leave this post on a cliff-hanger.
Stay tuned. Stay afloat. Wealth and freedom are in your future.
Jonathan

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Debt Relief Resources – 10 best sites for information

If you are new to the blog, click HERE to start at the beginning of my story.
POST #22
I have a lot of people ask:

Where can I do my research? What are the best resources?

There are many great resources on the internet. I’d like to think this blog is one of them! 🙂
Out of the hundreds of resources, about 10 of them are really worth your time. Here is my hit list. If you read the info at each of these sites, you will have a great foundation for understanding debt settlement.

Top 10 Debt Settlement Resource Sites

  1. Federal Trade Commission: A wealth of information on what is currently legal, illegal or yet to be determined. If you missed the Senate Committee hearing 2 weeks ago it is worth a viewing.
  2. National Association of Consumer Advocates: Know your rights
  3. Legal Advice Line: Get inexpensive expert legal advice.
  4. National Association of Consumer Bankruptcy Attorneys: Find an attorney in your area that has expertise in bankruptcy and debt settlement.
  5. About.Com:Credit: A collection of forums and blogs covering everything credit related.
  6. Credit Info Center: Great forums, articles and opinions on debt settlement.
  7. Zip Debt:  Charles Phelan is an extraordinary resource on the topic of debt settlement. His DIY program has gotten incredible reviews and results. His blog is indispensable.
  8. Hoffman Brinker: Contains step by step videos explaining the pros and cons of debt settlement.  Easy to understand and a great starting point for your education.
  9. Get Out Of Debt: Steve Rhode’s blog and resource site. Steve is an expert in the credit/debt field. His site is very well trafficked and he has a major presence there. If you post a question, you will get an answer.
  10. Consumer Recovery Network: Saving the best for last. Michael Bovee is the MAN.  He is the consummate expert in this field. Always on the cutting edge of this industry and very generous with his time. ’nuff said!

Happy researching!
Stay tuned. Stay afloat. Wealth and freedom are in your future.
Jonathan

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Debt Settlement Weapon of Choice – Consumer Recovery Network

If you are new to the blog, click HERE to start at the beginning of my story.
POST #21
I have shared with you, again and again, that debt settlement is a process. It forced me to do a lot of research, tested my patience and resolve and challenged my brain. But I want to make one thing clear, I am not an expert. I am a FIRC (former irresponsible recovering consumer) who successfully followed the coaching and guidelines of the Consumer Recovery Network DIY program.
Several times I have looked back on this experience and wondered if I could have done it all on my own without the help of a DIY program.  There is a lot of free info on the internet. Heck, this blog itself shows you many of the techniques used to navigate the process.  After careful review, I have concluded that you CAN do it without the help of a company…..but I don’t recommend it.
Here are a few pitfalls of going solo:

Ozzfest 2007: Zakk's Solo 3
Image by LuvataciousSkull via Flickr
  • Every situation and bank negotiation is different. You will have to improvise along the way. A wrong choice can kill the deal.

  • Timing is everything. Not all banks process the collections in the same time line. You will be doing some guessing.

  • The reps will lie to you. How will you sift through the BS?

I followed CRN’s DIY program. I listened to the CDs, read the workbook and had about 30 hours of phone calls with my CRN coach. Guess which was the most indispensable aspect?

The advice from my coach.

There were a zillion forks in the road during my debt settlement. All of the solutions came from discussions with my coach. I have shared many of these solutions already, but I want to add one last thing.
I knew was getting close to a settlement on these 2 big line of credit accounts. It would take a bit of fancy footwork, negotiating and quick thinking. There was critical phone call I had to make and decided to add an extra safety measure. This technique, appropriately called the Debt Settlement Weapon of Choice, can only be done when you have a coach. Hang on, this is a good one!
I called my CRN coach, put her on mute, then conferenced in the bank.  While I was talking with the bank, my CRN coach was listening in and emailing me questions to ask the bank rep. GENIUS!
We only did this once, during a critical call. It was a great help because, despite all of my preparedness, the flow of this particular conversation was beyond my expertise. I couldn’t distill the truth from the BS, nor could I determine the best questions to ask.
In short, you can do a full on “free” DIY by using info on the internet.  But for me, I concluded it was best to have an expert coach offering advice and counsel specific to my situation.  Especially when that advice was in real time during the conversation, via email!!!
Stay tuned. Stay afloat. Wealth and freedom are in your future.
Jonathan

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Debt Settlement Companies, Some Incur More Debt

If you are new to the blog, click HERE to start at the beginning of the story.

POST #4
Research! Research! Research!
You will hear me say this dozens of times. As a consumer, it is our responsibility to be educated and informed. The lack of education, laziness, or in my case, DENIAL, gets us in trouble.
I vowed to never again be an uninformed consumer. With that in mind, I put all of my efforts in to finding the best debt settlement options.  I spent 4 weeks and about 40 hours on the phone talking with different companies.
There is a barrage of information out there. Just by typing debt settlement into Google, you will get 8,650,000 results. Click HERE.

Insane. It is daunting to cull through these resources and decipher what the hell they are offering. I took my time to understand my options. My first calls were to the obvious big companies like: Credit Solutions, Ameridebt and CuraDebt.  But I also looked into some of the lesser known companies like Pacific Debt.  Here was the standard offer:

  • I was to deposit $2000/month into an escrow account.
  • The first 6 months of these payments into that escrow account would go towards paying the debt settlement company for their services.
  • I would continue to make $2000 payments for approximately 36 months.
  • As settlement offers came in, they would consult me.
  • The banks would be paid from this settlement account.
  • In 36 months, I would be out of debt.

At first, I was very excited and relieved about a solution to my problem.
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Below are the estimated savings and expenses from 2 of the companies I spoke with. As you can see there is an incredible amount of variance. A lot of that deals with the fees and the length of time you take to settle.

CuraDebt Plan

If they got a 50% savings on my $130,000 of debt, it would take 41 months of $2000/month payments to get out of debt. Total cost including settlements and fees:$81,900.
If they got a 60% savings on my $130,000 of debt, it would take 36 months of $2000/month payments to get out of debt. Total cost including settlements and fees: $71,500.
If they a 75% savings on my $130,000 of debt, it would take 28 months of $2000/month payments to get out of debt. Total cost including settlements and fees: $55,900.

PacificDebt

With $130,000 of debt, it would take 46 months of $2000/month payments to get out of debt. Total cost including settlements and fees: $90,995.
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Pretty interesting stuff, right!?!
After a few days, I saw something that didn’t make sense:

  • Before I would decrease any of my debt, the debt settlement company would increase my debt on average of $12,000 because they get paid first!
  • All of the companies say the bank offers their best deals during the first six months – but according to their suggested schedule, I would have no money left in my escrow account at 6 months because all of that $12,000 would go towards paying the debt settlement company their fees. Which by they way, is for a service they haven’t even performed. Let me repeat this because it is critical.

T

THE BEST OFFERS COME AT THE 6 MONTH MARK.  EVEN THOUGH I WOULD HAVE ACCUMULATED $12,000 IN MY ESCROW ACCOUNT, I WOULDN”™T HAVE ANY MONEY LEFT IN THERE TO PAY THE SETTLEMENT OFFER BECAUSE THAT MONEY ALREADY WENT TO PAY THE DEBT SETTLEMENT COMPANY!!!!

Talk about the contradictions!? In many cases, clients get discouraged at that point. They drop out of the program and declare bankruptcy. These debt settlement companies thrive on our falling out of the program. They are predatory companies much in the same way the credit cards are predatory lenders. Remember what I said about educating myself?  I would not be a victim a second time around.
So let’s review…. this is why most debt settlement companies are scoundrels:

  • I pay the debt settlement company $12,000.
  • In 6 months, the bank makes an offer.
  • Since I have no money in my escrow account, I ask the bank to spread the payments out over the next 6 months so I can have time to accumulate some funds.
  • The bank declines because most of their settlement offers have a 90 day payment time-frame.
  • Threatened by liens and judgments, I drop out of the program and declare bankruptcy.
  • The bank writes off my debt.
  • The debt settlement makes pure profit.

I proposed this contradiction to the reps, but their response was foggy at best. Since I was using the information they gave me to explain this contradiction, they didn’t have an answer that made sense. Instead, they deflected my question by saying they can get a better deal than I can get myself. WHICH IS TOTALLY UNTRUE BY THE WAY!
It became clear that the rep was just a sales person and had no REAL idea about this process. Once enrolled, I would never talk to him again.
As I said before, lets take ownership and take control. I fell into the debt trap, but I was not going to fall into the debt settlement companies’ trap.
Please don’t be so desperate and incur more debt when you are trying to get out of debt. If you take the time to run the numbers, you will see most programs don’t make sense.  An effective debt settlement company will charge a nominal start up fee, base their commission on performance AND take their commission AFTER you have paid the bank. Sound too good to be true? Stay tuned!
In the next post, I will discuss how some debt settlement companies are true consumer advocates.
Stay tuned, stay afloat. WEALTH AND FREEDOM ARE IN YOUR FUTURE!
Jonathan Grossman

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Debt Relief- So Many Options

POST #3
Research. Research. Research.
Once I finally realized that the end was near, I started doing extensive research on my options. Of course the first thing I thought of was bankruptcy. It was all I knew. I thought if you got behind on your bills, your only option was the big B.
With a few clicks on the web, I soon found a zillion companies offering many options. In the next post I’ll share some of my observations on the different companies, but today we’ll focus on the five most likely options you have:

  1. Bankruptcy – Chapter 13 or 7

  2. Debt Consolidation

  3. Consumer Credit Counseling

  4. Debt Settlement

  5. Nothing…which usually gets you back to the top of this list. Not a real option.

For a complete explanation of these options and an analysis of which option is best for you, CLICK HERE.
Here’s what I discovered for my situation:
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Bankruptcy

For me, bankruptcy felt like the death of my soul. A complete failure and announcement to the world that I had screwed up so badly that my only option was to wave the white flag. I had regular conversations with my wife about this option. Was this our destination? How could I face my family and friends? Just 2 years ago I was flying high. Now….death. Thinking back on it, the reason I did so much research was because I was compelled to find another way. I wasn’t going down without a fight. There MUST be another option.

Consumer Credit Counseling

I was familiar with consumer credit counseling. In fact, I had done this about 9 years ago. When my band, Dogwood Moon, got off the road we had accumulated a bit of debt. In order to gain some sense of control and balance in my life, I got a company to manage my debt. I made a lump sum monthly payment to them and they distributed it to my creditors. They tried to get the bank to lower my interest rates, but none of them actually could. Of course they took a fee, and although it was modest, there was really no significant benefit from the company. They just held my hand throughout the whole thing. I could have done it myself, had I been more disciplined. I soon realized this and when I made a bit of money, I paid the whole thing off early. Wasn’t a bad option then, but I wouldn’t do it again. In 2009 consumer credit counseling wasn’t really an option. I couldn’t afford to pay my bills, so it wouldn’t help me if they collected my money and distributed it. The money wasn’t there.

Debt Consolidation

My credit wasn’t good enough to get a decent loan for $130,000. Even if I did, I’d be making payment for the rest of my life. This would take too long and ultimately cost too much. I wanted to take action, rectify my situation and start over. This would be a slow process. I am not a slow kind of guy. I had finally decided to take action and I wanted to get it done….NOW!

Debt Settlement

When I came across the idea of Debt Settlement for the first time, it was a real eye opener for me. I hadn’t even considered the prospect of negotiating with the banks in this way. I never thought of the bank as a collection of real people. It just seemed like a monster I had made a bad deal with and was now sucking up all my money. With Debt Settlement, you call your bank and negotiate a lump sum payoff of the account that is less than full balance. This negotiation can be done in 3 different ways:

  1. You do it on your own

  2. You do it while being coached by a debt settlement specialist.

  3. You hire a company to negotiate on your behalf and pay them a fee. BEWARE: THESE FEES CAN VARY DRASTICALLY! I will discuss this in the next post.

After careful thought, I chose Debt Settlement, option 2. At the heart of Debt Settlement is the ability to negotiate. This was very appealing to me because I love negotiating. My father is a retired lawyer. Growing up was like a series of scenes from that Albert Brooks movie, Defending Your Life. At an early age, I was trained to ask for things in a diplomatic way, stick to my guns and be prepared for the inevitable interrogation. Maybe I should have been a lawyer! You will think I am crazy when I say this, but I have actually enjoyed the Debt Settlement process. I chose a company that was a true consumer advocate. They didn’t charge exorbitant fees and the debt settlement specialist assigned to my case was nothing short of awesome. In my humble opinion, critical to your success with Debt Settlement is the company that assists you. Some of them actually will save you money. Others will take advantage of you and PUT YOU FURTHER IN DEBT.
In the next post, I’ll discuss the companies I chose to avoid and the company I ended up using, Consumer Recovery Network.
Stay tuned, stay afloat. WEALTH AND FREEDOM ARE IN YOUR FUTURE!

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$130,000 of Credit Debt – The Beginning: How could I Let It Happen?

POST # 2
When I look back on what happened, the writing was on the wall. If I had been smart enough to have a business manager, this would have never happened.
In 2004, things were going great. I was newly married, had no kids, no debt and had just bought my first home. I was composing music for the hit television show Joan of ArcadiaMoney was no object. I was like a kid in candy store. Just 4 years earlier, I was living in a mini-van with my wife (then girlfriend) touring the United States as a folk rock duo, Dogwood Moon. We were lucky to make $5,000/month and if we did, we felt like we had money.
All of sudden I got a lucky break and I was making well over $400,000/yr. I had no debt aside from my home.  My savings account was steadily growing and about to hit $100,000. Neither my wife, nor I, could spend all the money. It was nice, to say the least.
We went about our business for the next 2 years. Saving a bunch and spending a bunch. I justified my spending because I had a great job and was saving a butt-load of cash every month. Why not spend!?!?
?

Mistake number 1:

ASSUMING THE GOOD TIMES WILL LAST FOREVER

Fast forward to 2006.

  • My TV show got canceled.

  • The economy tanked.

  • The real estate market tanked.

  • My interest only 2 yr ARM was about to be called.

  • My wife gave birth to our first beautiful child.

  • None of my contacts in the biz were working.

  • I went thru all of my savings…..yup ALL $100,000 of it.

  • I borrowed another $80,000 from a line of credit on my house.

There were a lot red flags….but I ignored them.
I kept thinking that big gig was right around the corner.  Well guess what? It wasn’t.

But that didn’t stop me. I kept acting like I was still making a lot of money. I had the POTENTIAL didn’t I? Why severely adjust my lifestyle when things will pick up any minute?
By the end of 2006, I finally made some changes. Here’s where I stood:

  • I sold my home for a profit.

  • I paid off the $80,000 line of credit.

  • I had about $80,000 in cash profit from the sale.

  • No job, but lots of prospects.

  • Ignorant hope that everything would just work itself out.

Instead of socking that money away and downsizing to an apartment within our means. I did what any wide-eyed monkey with a little bit of money and the ignorant hope of future success would do:

I BOUGHT ANOTHER HOUSE AND SUNK ALL OF THAT MONEY INTO REMODELING IT.

You see, I had turned a nice profit from my first house. That was easy, right? It would happen again, right. WRONG. That wrong assumption was the straw the broke the camel’s back.

From July 2007- July 2009 I dug myself into the deepest financial hole of my life.

Here were my other BIG MISTAKES:

  • I lived beyond my means.

  • Instead of saving some of my small real estate profit, I put it back into the sagging real estate market.

  • I continued to spend most of my time trying to get gigs in the TV market – which had crashed.

  • And finally:  DENIAL, DENIAL, DENIAL!

In July 2009, things came to a head. I was $130,000 in debt and living off my lines of credit. I had 2 more months of that until there would be no choice other than bankruptcy.
Desperation is the mother of invention. I would feel humiliated to go bankrupt, foreclose on our house. I couldn’t let myself be a Hollywood statistic……even though I already was!
After 6 weeks of research I came to the conclusion that debt settlement was the right choice for me. In the next few posts I’ll discuss:

  • Why I chose debt settlement over bankruptcy, consumer credit counseling or debt consolidation?

Stay tuned, stay afloat. WEALTH AND FREEDOM ARE IN YOUR FUTURE!

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