Taking Charge of Your Debt and Credit: A Complete A-Z Guide to Understanding Debt and Credit, What Everyone Needs to Know to Survive in Todays Economic Climate

TAKING

CHARGE

of your

DEBT &

CREDIT

A Complete A-Z Guide to understanding Debt and Credit, What everyone needs to know to survive in todays economic climate

ROB GOLDSTEIN

AuthorHouse™

1663 Liberty Drive

Bloomington, IN 47403

www.authorhouse.com

Phone: 1-800-839-8640

© 2012 Rob Goldstein. All rights reserved.

No part of this book may be reproduced, stored in a retrieval system, or transmitted by any means without the written permission of the author.

Published by AuthorHouse 11/30/2012

ISBN: 978-1-4772-8765-1 (e)

ISBN: 978-1-4772-8766-8 (hc)

ISBN: 978-1-4772-8767-5 (sc)

Library of Congress Control Number: 2012920832

Any people depicted in stock imagery provided by Thinkstock are models,

and such images are being used for illustrative purposes only.

Certain stock imagery © Thinkstock.

Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.

CONTENTS

Acknowledgements

Introduction

Chapter 1. Debt Negotiation

Chapter 2. Credit Repair

Chapter 3. Bankruptcy

Chapter 4. Identity Theft: Why Would Anyone Want To Be Me?

Chapter 5. Mortgages

Chapter 6. The Legal Process

Chapter 7: How To Get Into Debt Without Really Trying

Chapter 8: Scams, Schemes, And Snake Oil

Appendix 1 The Fair Debt Collection Practices Act

Appendix 2 Violations Of The Fair Debt Collections Act

ACKNOWLEDGEMENTS

I would like to thank my ex’s for always getting me into hot water and my having to survive. But really, I would like to thank Bert and Rebekah (BK Attorneys) for believing in me over 20 years ago, and aiding me with the bankruptcy and legal training from a trustee’s perspective. My CPA Stan, who believed in me all these years and who still is my CPA today after 35 years. I would also like to thank Michael, Ellen, Matt, Jordan, Dennis, and Frank, all in NY, for their support in becoming a force on the East Coast. And finally, my two sons Jeremy and Zach, because……they are two great kids and I do this all for them.

INTRODUCTION

A penny saved is a penny earned. Remember that saying? We used to teach our children little anecdotes such as this to help instill in them the basics for financial growth and prosperity, so they would grow up to be hard working, money saving adults. It used to be that simple. Work hard and save your money so you could buy a house, own a car, raise a family. What happened?? There are many factors that have contributed to the economic downturn and recession that has forced millions of consumers into Bankruptcy, Foreclosure, and Poor Credit Oblivion. Too many reasons to explain here, however, as a result of the poor state of the American economy millions of consumers have been forced to endure the unnerving stress and anxiety associated with bad credit and being in debt. Most often it is not through any fault of their own. The system that we are all attuned to simply broke down. The arguments and the blame game extend to all sides of the political and sociological spectrum. The bottom line is people need help. Many folks lost their homes, some lost their families from the overburdening stress, and some lost their lives as well. The government is trying to assist in the recovery by providing additional funds and resources to help consumers crawl out from under the financial rubble and make a fresh start. It still isn’t easy. Most people aren’t educated to the ins and outs of credit and debt matters and the legal system in general. That lack of knowledge can instill fear in the strongest of men. Fear leads to anxiety and stress and that can have a devastating effect on our lives. It doesn’t need to be that way. As we move forward in our new century you will see more and more schools and learning institutions integrate educational programs designed to teach us all at a young age how to maneuver in and around the financial world. They say knowledge is power and in no place is that more true than in the world of credit and debt. This book was written in the hope of educating the millions of Americans who are struggling to make ends meet and who may feel lost and hopeless as a result of a dire financial situation. By reading this book you will become empowered and you will learn that there is hope, you do have options and as a citizen of the USA you have rights and protections in place that you were most likely unaware of until now.

This book is a reference manual that you will refer to for years to come. Rob Goldstein has spent years in the industry of credit and debt negotiation and has shared his years of experience and knowledge with you in this book. So read on and relax, you are in good hands here and always remember you should always…

EXPLORE YOUR OPTIONS!

CHAPTER 1. DEBT NEGOTIATION

OVERVIEW

The first thing you need to realize before you read this chapter is that debt negotiation is illegal. Anyone who tells you it is acceptable to try and negotiate your debt down, or change the interest rate or term of repayment or do anything to make it easier to resolve your debt is just not telling the truth. Also, it is completely illegal to hire a company to negotiate your debt for you and nobody has the right to help you satisfy your outstanding debt.

OK. I LIED.

But that is what any legitimate debt collector is going to tell you. More than likely you have read this or heard about it somewhere. Or you may have had a debt collector say that to you. And why shouldn’t they? After all, these people make a living by getting as much money out of you as they possibly can. They are commissioned on the amount they collect. Depending upon where they are in the collection process, they could be making a lot more money than you might imagine. Some of them are good at it. Very good. Hardly any of them are very nice people. And most of them violate collection laws with impunity. They thrive on their ability to harass and insult people who are usually in a bad situation because of no fault of their own. If You’ve ever had the misfortune of having to deal with one of the aggressive collectors, you know what I mean. If you haven’t I hope you never do. But debt collectors are not invincible. As a matter of fact the more you know about debt collectors and debt, the more you realize that in many cases, you have more power than you may think.

1. WHAT THEY DON’T WANT YOU TO KNOW

No How To publication would be complete without a what they don ‘t want you to know section. Nothing empowers people more than the thought that they know something they are not supposed to know, and that somehow there is a magical transformation when such information is received. While there is often considerable truth to that concept, it is not necessarily true that debt negotiators have any industry secrets that if found out will put collectors out of business. In Fact, debt collectors have one and only one thing that separates them from the human race in general. And that is their insatiable desire and uncanny ability to intimidate people. Once you get past that, you will find that they are in many ways just like ever yone else. And like everyone else, they have their weaknesses. Both personally and professionally. (If you consider what they do to be a profession that is.) Here are some things you need to know.

A. ALL DEBT IS NEGOTIABLE

This is the first and most important weapon for you in your debt negotiations. While there are some debts that are subject to strict guidelines, but even those have some wiggle room. Of course, Federal and State Income Taxes, Federally Guaranteed Student Loans, Payroll Taxes and generally speaking government debts may not be as negotiable as private debt. However, even the IRS settles tax debt under certain circumstances. We are not going to discuss that kind of debt in this chapter. We will be dealing with credit card, mortgage and other personal debt that has buried the average consumer into a seemingly bottomless hole. Well, that hole has a bottom and a way out.

When you are speaking to a collector of any kind, they have authority to settle your debt within a certain range. If they are working for a client, let’s say Bank of America, they are given guidelines to follow by that client. If they work for the .company that owns the debt they usually have much greater leeway in negotiation because their bosses bought the debt for pennies on the dollar and can turn a good profit, Even if they settle for a very low amount. One of the most important things you need to find out is whether the debt is assigned or purchased. You can simply ask for this information and get the answer sometimes. Sometimes they will refuse to give it to you. Or as is often the case, the collector simply may not know the answer. You always have the right to request this information in writing and they are required by Federal and some state laws to respond. We will discuss your rights under these laws in another chapter. But for now keep this essential point in mind.

B. CAN I DO THIS FOR MYSELF?

Of course you can. But there are several factors to take into consideration when you are considering negotiating with a creditor. The first and possibly the most important one is your personality. If you are easily upset and tend to lose control in stressful situations, you may want to take that into account when making the decision to handle your own debt management. I’m sure you have heard that he who represents himself in a legal battle has a fool for a client. In many ways, that applies here.

Remember, the main thing debt collectors know how to do is intimidate. It is very difficult not to succumb to that intimidation when you are under pressure or to lash out at the person who is appl ying it. The kind of pressure that says you may lose your car. Or your house. Or that your pay or bank accounts may be attached or levied. Or that because of this you might not be able to take care of your family. These are very powerful tools the debt collector uses to intimidate you. They also employ insults and threats which are usually illegal. But the legality of the threats are seldom challenged and certainly not something most people consider when they are being harassed by a creditor. That is why you should consider having a professional debt manager or negotiator handle your delinquent debt for you. Of course, you need to make sure the company you hire is reputable and in compliance with all relevant laws in your state. Look for references and check with your state’s attorney general and the Better Business Bureau. Trained professionals are not intimidated by debt collectors. Often, it is exactly the opposite situation.

While a professional is often the best choice, you have the right to do anything they may do. But you need to know the elements of a negotiable debt and ho w to handle them.

C. HOW OLD THE DEBT IS MATTERS

Debt is typically aged in 30 day intervals. This is why you will see entries on your credit report that say the account was 30, 60, 90 etc days delinquent. What happens to that debt during each interval determines ho w negotiable it is, and more importantly who handles the debt.

i. 1 to 30 Days Delinquent

Most companies have an internal collections department. These are usually people who either double as customer service representatives or actually are customer service representatives. Generally, their job is to call delinquencies that are ten or fifteen days after the due date and to help the customer make their payment before it goes 30 days delinquent. Some very aggressive Companies may call you as earl y as one day after the due date, but this is a way to collect debt that is probably going to be paid without any coaxing from them. The 5% or more in penalty they assess after one day’s delinquency is usually enough for most consumers to make the payment on time unless there is some kind of problem. Whatever the company policy, you will get this friendly reminder and an apology if you ‘ve already made your payment. This person seldom if ever has any settlement authority because a large portion of this debt is resolved with little if any input from them.

If you are experiencing a serious financial issue such as a job loss or medical emergency, you should let them know. They will probably tell you to do the best you can and they will notate your account. In extreme circumstances, they may be able to waive payments for a month or two until you work things out. Many companies will do this, so don’t be afraid to ask. If there is a service problem, this is a good time to raise it, especially if that is the reason or a contributing factor in your decision to withhold payment. If the problem is serious enough the company may address and cure the problem right then and there. If they refuse to, your complaint is registered and noted for future disputes if it remains unresolved . If you can make the payment at this time, it ‘s best to do so and pursue your complaint through other company channel s. If your problem is that you just can’t afford to make the payment, more than likely your account will move to another internal department t hat handles more delinquent accounts.

ii. 30 to 59 Days Delinquent

Depending upon the creditor, this could stay in their internal collections department or be assigned to a collection agency. Since most of this debt is also resolved with just a little prodding by the collections department and it is a considerable cost to assign the debt to the collection agency, you will probably still be dealing directly with the company collectors. The difference may be that these people act more like collectors and less like customer service people. The thing to remember about collectors in this category is that their pay is somewhat dependent upon their performance. The more they collect, the more they make. As you would expect, they become more aggressive because of this, and are more likely to become abusive. If the company is interested in retaining you as a customer the attitude may be less aggressive. If they are not, or if they have some kind of leverage over you, like turning off your Cable TV or water, they will be less likely to care about you or why you are delinquent.

At this point, the reason for your delinquency is something you need to consider. People often just miss a payment and take care of the late payment right away. Some people just don’t make the payment because they get some kind of satisfaction out of making the collector work for the money. Whatever the situation, most of this debt is paid during this period. The collector makes a few extra bucks and everyone moves on. Everyone, that is, except someone who is experiencing serious financial issues and can ‘t make the payment under any circumstances.

iii. 60 to 89 Days Delinquent

This is often your last chance to settle a debt with the original creditor. Settling a debt at this state usually means you pay them everything you owe and you keep your account open. Getting an account current at this stage is a good thing for your credit of course. It is also the time that you start dealing with the heavy hitters of the company’s collection department. Their job is to reduce bad debt or to move it to an accounting category known as a charge off. What happens in either situation is that the quality of the company’s debt improves. To some creditors, this is a critical issue. For instance, if they are a bank, their ability to borrow and/or lend money is dependent upon their delinquency ratio. When debt goes to 90 days delinquency, their ability to do so may be seriously curtailed. So the collector who you are dealing with at this stage is probably paid a bigger commission to collect your debt. Accordingly, their aggression will increase.

iv. 90 Days Delinquent Or More

Debt that goes past 90 days is generally charged off