This is one of my favourite all time question. For years the Canadian media has been picking up random information on debt settlement companies from our American cousins. While there are tens of thousands of success stories, most of the published stories on debt settlement tend to be negative.
There’s an old saying about not believing everything that you read. I’ve learned first hand over the years that this is true. Here are a couple of examples why:
At the start of 2009 a newspaper called The Toronto Star did a story on me and my company. It was featured on the front page of the business section and was in a positive light. The story generated some good exposure for Total Debt Freedom Inc. and for debt settlement in general. However, some facts I presented to the reporter were taken out of context or maybe he choose to stretch the truth a little to make for a more appealing read. For example, I mentioned that debt can get away from just about anyone and one of our clients was a former Olympian. The final story read that that individual was an Olympic Gold Medalist which wasn’t true. Many reporters tend to be freelance so they are paid to sell a good story; so as a result, it seems stories can and do get hyped up sometimes.
A few months later a negative example appeared on the evening newscast. CTV which is a major Canadian newscast put out a three minute televised story on their “Consumer Alert” segment by reporter and financial writer Pat Foran. He talked about how debt settlement was potentially a scam, and how Marissa Ruiz (the victim) was very disappointed and that consumers should be wary. The story was packaged and presented as Canadian issue, and made viewers believe that Canadians were getting scammed left, right and center. When I researched the names in the story further, it turned out Ruiz was California resident and used an American debt settlement company that had a horrible BBB rating. The incident appeared to be that of one rotten apple in the US debt settlement industry. Apparently the reporter borrowed the story from another press release he found, and packaged it as his own. Why did Pat Foran forget to mention these facts in his broadcast?
The story then wrapped up and interestingly handed off to a company called “Credit Canada” which is a non-profit credit counselling agency in Toronto. After I reviewed the broadcast and made some notes, I emailed Pat Foran and CTV about their televised slam of debt settlement in Canada. I literally corrected 7 very significant points that were not factual. My email was virtually ignored. From a legal perspective there is no remedy available because of free speech; the media seems very immune.
Needless to say, my feelings about the media are somewhat mixed now.
Bankruptcy trustee’s and credit counsellors have all had their say about debt settlement and why they think it’s a scam. Let’s look at their arguments.
Trustee’s tend to argue that all debt settlement fees are collected up front before any work is done and no form of debt relief is ever given to the consumer. That’s not true; in fact settlement fees are collected monthly throughout a 36 month program. And most settlement companies like ours offer a service guarantee that returns any money paid that a settlement was never finalized on. If the client has enrolled for a 36 month plan then the fees are taken monthly and most clients experience their first settlement by around month 5-8. So how is a debt settlement company getting paid in full up front? We actually get paid as settlements are arranged.
A friend of mine is a trustee in Bankruptcy, and a really wonderful guy, what I learned from him is that close to 100% of people going through bankruptcy or a consumer proposal (a form of bankruptcy) are in some state of default with the trustee. What that means is, they haven’t met a major term of the requirements to be discharged from the debt, and apparently a large portion of those people never do.
Guess what else I learned? The trustee actually gets paid before the debtor is ever discharged from what they owe. Isn’t that a classic case of the pot calling the kettle black? The trustee is in fact a court appointed agent to the creditors, so even though you pay the trustee to get you debt free, he is actually looking after the creditor’s best interest first. Not yours.
Here’s an interesting fact about debt settlement and our company I shared with my trustee friend: 70-80% of the people that enrol will complete the program. The look of shock and awe on his face was priceless when I told him that. He thought the completion rate of people seeking debt settlement would be significantly less then his plans.
Non-profit Credit Counsellors are another all time favourite of mine; they are in bed with the banks, media, politicians and other non-profit companies.
My understanding of credit counselling is that more then 60% of all people enrolled will drop out of their debt relief program before it’s completed.
The first thing to understand is that “non-profit” does not mean free, every business needs to earn money to keep its doors open and pay take care of rent and payroll. All that really needs to happen to maintain a non-profit status from the government is that the company needs to meet certain requirements and can’t show a profit at the end of the year. That seems pretty simple and easy to do; all the principals of the company would need to do at the end of the year is bonus out any profits to themselves.
Credit counsellors have somehow managed to get a lot of positive, free and unexplained media exposure that debt settlement doesn’t get because of their non-profit status.
The other day when a local politician appeared on the news to discuss new credit card legislation in Canada; somehow a spokeswoman from non-profit credit counselling, again Credit Canada, was right there beside him. I wonder why I wasn’t invited to speak as a specialist on the new credit card legislation. I mean the non-profit “specialist” who appeared wasn’t even able to calculate simple math in her head, let alone contribute any real dialogue to the discussion.
On several provincial government websites that talk about debt relief options, they all seem to defer to non-profit credit counselling as the answer to all debt problems. This politician and host on TV did the same thing.
Some creditors will actually tell a financially distressed debtor to go and use a non-profit credit counselling company if they are having money issues. Here’s a big question. Why would a creditor only refer the debtor to non-profit credit counselling? You don’t need to look very far for the answer; credit counselling is really a kinder and gentler collection agency for the banks.
This relationship between credit counselling and banks has been criticized for years. Credit counsellors get more money back to the creditors over a longer period of time, plus many get what’s called a “fair share” payment from the banks. So your creditors are actually paying the credit counsellors to collect the debt.
Don’t let the “non-profit” banner fool you, credit counselling is working more for the creditors, then it is for you. Did you know that if you owed $25,000 in credit card debt, it would probably cost you about $29,000 in total over 5 years with credit counselling? With debt settlement your total cost would be around $15,000 over 3 years
The Internet and media is a prime example of unregulated free speech, so it's easy for anyone to post opinions, spread rumours, tell lies, create controversy or even build entire Web sites devoted to whatever topic is desired, usually without any consequence. Unfortunately, this means the Internet and media is a perfect medium of negative "information" about countless number of companies, organizations, and individuals. Even respected, successful, high-profile companies like Toyota, McDonald's and Wal-Mart are targets for negative communications.
Is the information factual? That's something you have to decide, but before you do, be sure you have all the facts and are certain about the accuracy and credibility of the source of any information found on the Internet and media.
It begs the question: Why are the other debt relief programs like bankruptcy and credit counselling feeling so threatened by the growth of the debt settlement industry? Are we really that much better of a debt relief option to their programs? I guess so.
Wednesday, June 10, 2009
Tuesday, April 7, 2009
The 7 Questions You Need to Ask a Debt Settlement Company Before You Sign Up
Having settlements negotiated on your credit card debts requires know-how, patience, persistence and requires a lot of time. Using a good debt settlement company is a great idea if you want it done right.
The total cost of getting your debt settled over 3 years with all fees included should be less then what you owe today. There is however some questions you should ask the debt settlement company before you begin.
What is their better business bureau rating?
Look for a company with an “A” rating with the BBB. It’s a good sign the debt settlement firm have given their clients very little to complain about. Visit the better business bureau’s website and search for the company you are interested in doing business with.
Are they listed with Dun & Bradstreet as part of the web logo program?
It’s a good sign the company is active and not in bankruptcy
Are they a member of the International Association of Professional Debt Arbitrators or IAPDA?
The IAPDA provides useful debt negotiation training to new hires in debt settlement companies. Being a member shows a commitment by the company to training their debt negotiators properly.
Where are they located and licensed to work?
If they are local, why not pay them a visit? A company operating by a PO Box should be avoided. Several American debt settlement companies advertise their services in Canada, and visa versa, but they aren’t familiar with Canadian creditors and collection practices. When seeking Canadian debt settlement help, always deal with company in Canada and is familiar with Canadian creditors.
Is debt settlement their primary line of work?
Some debt settlement service providers have surfaced who have little to no specialization in debt negotiation. Mortgage agents, real estate agents and even bill collectors working from their home all come to mind. All of these people are usually not properly licensed, trained, insured or bonded to negotiate your debt. They are usually just looking for a quick buck. Always deal with a company that just settles debt; “jack of all trades” are usually masters of absolutely nothing.
How long have they been in business?
In debt settlement, having experience matters. Debt settlement is a newer industry and dealing with an experienced company with a proven track record of success is always better. An established company will have relationships and understanding of creditors’ collection and negotiation policies.
Have they fully disclosed the negative aspects of a debt settlement program?
If the negative aspects of debt settlement haven’t been explained fully then that’s a good sign the company is either too new in the industry or a fly-by-night operation. Well run debt settlement companies just don’t talk about benefits; they should talk to you and fully disclose all aspects of the program so you are going through it with your eyes wide open. In particular they should freely talk about these three items:
1) The threat of legal action while in the program
2) Effects of debt settlement on your credit
3) Collection calls cannot be guaranteed to stop
The best indicator of a good company is full and absolute disclosure about the program. If they are not speaking to you in plain English, are evasive or talk in circles, run, do not walk away from these companies.
Debt settlement is a for-profit business model and the company will not be compensated in anyway by your creditors like some credit counselling companies are, so there is a cost involved. But as mentioned before, if you choose the right company, you should get debt free in 3 years for less then what you owe today.
The total cost of getting your debt settled over 3 years with all fees included should be less then what you owe today. There is however some questions you should ask the debt settlement company before you begin.
What is their better business bureau rating?
Look for a company with an “A” rating with the BBB. It’s a good sign the debt settlement firm have given their clients very little to complain about. Visit the better business bureau’s website and search for the company you are interested in doing business with.
Are they listed with Dun & Bradstreet as part of the web logo program?
It’s a good sign the company is active and not in bankruptcy
Are they a member of the International Association of Professional Debt Arbitrators or IAPDA?
The IAPDA provides useful debt negotiation training to new hires in debt settlement companies. Being a member shows a commitment by the company to training their debt negotiators properly.
Where are they located and licensed to work?
If they are local, why not pay them a visit? A company operating by a PO Box should be avoided. Several American debt settlement companies advertise their services in Canada, and visa versa, but they aren’t familiar with Canadian creditors and collection practices. When seeking Canadian debt settlement help, always deal with company in Canada and is familiar with Canadian creditors.
Is debt settlement their primary line of work?
Some debt settlement service providers have surfaced who have little to no specialization in debt negotiation. Mortgage agents, real estate agents and even bill collectors working from their home all come to mind. All of these people are usually not properly licensed, trained, insured or bonded to negotiate your debt. They are usually just looking for a quick buck. Always deal with a company that just settles debt; “jack of all trades” are usually masters of absolutely nothing.
How long have they been in business?
In debt settlement, having experience matters. Debt settlement is a newer industry and dealing with an experienced company with a proven track record of success is always better. An established company will have relationships and understanding of creditors’ collection and negotiation policies.
Have they fully disclosed the negative aspects of a debt settlement program?
If the negative aspects of debt settlement haven’t been explained fully then that’s a good sign the company is either too new in the industry or a fly-by-night operation. Well run debt settlement companies just don’t talk about benefits; they should talk to you and fully disclose all aspects of the program so you are going through it with your eyes wide open. In particular they should freely talk about these three items:
1) The threat of legal action while in the program
2) Effects of debt settlement on your credit
3) Collection calls cannot be guaranteed to stop
The best indicator of a good company is full and absolute disclosure about the program. If they are not speaking to you in plain English, are evasive or talk in circles, run, do not walk away from these companies.
Debt settlement is a for-profit business model and the company will not be compensated in anyway by your creditors like some credit counselling companies are, so there is a cost involved. But as mentioned before, if you choose the right company, you should get debt free in 3 years for less then what you owe today.
Thursday, February 5, 2009
Credit Vs Debt - Can I Get Debt Free Without Ruining My Credit?
If you are drowning in debt, and you are serious about doing something to end your financial problems, then you will need to decide where to focus your efforts.
You should decide, do I want to eliminate my debt or rebuild my credit? For most people with too much debt it's impossible to achieve both at the same time.
The truth of the matter is if you are carrying a lot of debt, and are near, or at your credit limits on your credit cards while only making your minimum payments, then your credit is going nowhere but south. If you don't believe me, then go to your bank and ask for a consolidation loan to pay off your debt. Chances are the answer is, "no".
To put it in a simple way and using $40,000 of various unsecured debts as an example. Ask yourself, would you rather be:
1. Completely debt free in 3 years with bruised credit.
Or
2. Still owe $40,000 in 3 years with well below average credit.
Scenario number 1 illustrates what happens when you successfully complete a debt settlement program, and scenario number 2 reflects what would happen if you tried to continue to make minimum monthly payments or used credit counselling.
The latter would actually make your credit rating even worse then settling your debt. Also in scenario number 2, minimum payers, on average, can expect to take 15-30 years to pay off their credit card debt and end up paying about 3-5 times what they owe today in total due to interest. If left unchecked, that $40,000 in debt could easily take over $125,000 to pay off over a period of 25 years, with no significant improvement in your credit score until it's all paid off.
The problem is the majority of the population would focus on the importance of credit over getting rid of their debt. They don't want to ruin their credit, and that is exactly what keeps people in debt. Which is coincidentally, what generates profits to creditors.
Look at it this way, if your house was burning down, should you really care if the fire department is trampling all over your gardens? No, a garden can very easily be regrown, and so can credit.
What I am trying to demonstrate is credit really isn't that important if you are drowning in debt. It's the welfare of your family that should come first. All that your credit got you in the first place was a bunch of debt. When you have a ton of debt, you can't get new credit anyways. So ask yourself this. If you have all this debt you can't afford, and are going nowhere fast with it. What do you really need credit for right now anyways?
The truth is credit is actually very easy to rebuild once you got rid of your debt. I have personally seen credit scores jump over 100 points a few months after a debt settlement plan is complete. And that can be accelerated even further by using a secured credit card responsibly.
Take a good look at a debt settlement solution if you are serious about eliminating your debt. It's not going to be the right solution for everyone, but it can help you avoid bankruptcy and get debt free fast with less damage to your credit then bankruptcy or credit counselling.
For most people using debt settlement, they should expect to get out of debt in 1-3 years if they follow the program. Even using a 3 year plan as an example, the total cost of the program including all fees and settlements, should be about 30-40% less then what is owed today.
You should decide, do I want to eliminate my debt or rebuild my credit? For most people with too much debt it's impossible to achieve both at the same time.
The truth of the matter is if you are carrying a lot of debt, and are near, or at your credit limits on your credit cards while only making your minimum payments, then your credit is going nowhere but south. If you don't believe me, then go to your bank and ask for a consolidation loan to pay off your debt. Chances are the answer is, "no".
To put it in a simple way and using $40,000 of various unsecured debts as an example. Ask yourself, would you rather be:
1. Completely debt free in 3 years with bruised credit.
Or
2. Still owe $40,000 in 3 years with well below average credit.
Scenario number 1 illustrates what happens when you successfully complete a debt settlement program, and scenario number 2 reflects what would happen if you tried to continue to make minimum monthly payments or used credit counselling.
The latter would actually make your credit rating even worse then settling your debt. Also in scenario number 2, minimum payers, on average, can expect to take 15-30 years to pay off their credit card debt and end up paying about 3-5 times what they owe today in total due to interest. If left unchecked, that $40,000 in debt could easily take over $125,000 to pay off over a period of 25 years, with no significant improvement in your credit score until it's all paid off.
The problem is the majority of the population would focus on the importance of credit over getting rid of their debt. They don't want to ruin their credit, and that is exactly what keeps people in debt. Which is coincidentally, what generates profits to creditors.
Look at it this way, if your house was burning down, should you really care if the fire department is trampling all over your gardens? No, a garden can very easily be regrown, and so can credit.
What I am trying to demonstrate is credit really isn't that important if you are drowning in debt. It's the welfare of your family that should come first. All that your credit got you in the first place was a bunch of debt. When you have a ton of debt, you can't get new credit anyways. So ask yourself this. If you have all this debt you can't afford, and are going nowhere fast with it. What do you really need credit for right now anyways?
The truth is credit is actually very easy to rebuild once you got rid of your debt. I have personally seen credit scores jump over 100 points a few months after a debt settlement plan is complete. And that can be accelerated even further by using a secured credit card responsibly.
Take a good look at a debt settlement solution if you are serious about eliminating your debt. It's not going to be the right solution for everyone, but it can help you avoid bankruptcy and get debt free fast with less damage to your credit then bankruptcy or credit counselling.
For most people using debt settlement, they should expect to get out of debt in 1-3 years if they follow the program. Even using a 3 year plan as an example, the total cost of the program including all fees and settlements, should be about 30-40% less then what is owed today.
Tuesday, January 6, 2009
Help, I Am Being Sued by a Bill Collector!
If I had a dime for every time a bill collector from a collection agency threatened someone in debt with a lawsuit and actually followed through on it, I would probably be an extremely poor man. It's rare for a collection agency to sue people but it is more common for the bill collector to threaten legal action.
However, you should be aware that when you borrow money as a loan or on a credit card you are in an agreement. Creditors use carefully worded contracts so they do not lose their money if you default in your payments. Understand that anytime you are in breach of a contractual arrangement, you are exposing yourself to a lawsuit.
It's because of this fact that bill collectors use their seemingly endless supply of one liner's that end with threats of "legal action".
Below are some reasons why the threat is rarely followed by action:
Suing someone takes time, financial & human resources.
Despite that bill collector going on about being in debt and suing you for being a bad person, it's rarely an emotional decision to sue and more of a business one. Throwing good money after bad in hopes a lawsuit will collect a debt is a colossal waste, if you know you can never do anything with a judgement once you get it.
Supporting documents are required for a lawsuit.
There are situations where actual proof that the debtor owes the debt is somehow unavailable. A judge needs to hang his hat on something when issuing a judgment to a creditor against a debtor, and they want to see proof the debt is owed.
The statute of limitations.
This is a law in place that defines the period within which legal action may be taken. This time frame varies depending on your laws so you would need to check with a licensed professional in your area.
It's far more cost effective for a collection agency to threaten legal action rather then actually spend the human resources, time and money at actually doing it. That's why practically everyone dealing with bill collectors is threatened with a lawsuit at some point in the collection cycle. Collection agencies are masters of empty threats.
Now, don't rest too easy, there are situations where the threat of a lawsuit may be very real. You have to be alert to two points in the collection cycle. The original creditor and the debt buyers.
The collection cycle usually follows this order: Original Creditor --> Collection Agency --> Debt Buyers.
Some original creditors can be litigious. What that means is they are inclined to sue you if they know you have the means to pay the debt and/or you own a home with equity. They may decide to hire a law firm to sue you to secure the debt with a judgement rather then assigning the debt to a collection agency to harass you.
The collection agency is usually (but not always, some creditors skip this step) the second step. The agency is a paid a commission usually ranging from 10-25% of what is collected for the original creditor.
The debt buyers are often the last collection step. It's usually some form of a collection agency that buys debt for a few pennies on the dollar. Because the debt buyer owns the debt, they can do what ever they want with it. I have seen some debt buyers just blindly sue people when there are no assets to satisfy a judgement. It's a really bad business decision but it does happen sometimes. Others won't even spend the time or money, it depends on company policy.
A debt assigned to a collection agency on the other hand is a different story. I would estimate that your chances of actually being sued by a collection agency that has been assigned a debt for collection, is about as good as being struck by a bolt of lightening on relatively clear day. However, it is also fair to say that if you are behind in your payments and owe debt then your chance of being threatened with a lawsuit by bill collectors is nearly as certain as death and taxes.
Debt is tough to deal with; there is no easy way out of it. Seek help if you need it, debt settlement is one of the best alternatives for people dealing with collection agencies because it is fast, effective and has little to no further impact on your credit rating.
Richard Cooper is Founder & CEO at Total Debt Freedom Inc. Canada's most respected debt settlement company. Total Debt Freedom offers debt settlement plans that can save you 40-70% of what you owe and get you debt free in 1 - 3 years. http://www.totaldebtfreedom.ca/
However, you should be aware that when you borrow money as a loan or on a credit card you are in an agreement. Creditors use carefully worded contracts so they do not lose their money if you default in your payments. Understand that anytime you are in breach of a contractual arrangement, you are exposing yourself to a lawsuit.
It's because of this fact that bill collectors use their seemingly endless supply of one liner's that end with threats of "legal action".
Below are some reasons why the threat is rarely followed by action:
Suing someone takes time, financial & human resources.
Despite that bill collector going on about being in debt and suing you for being a bad person, it's rarely an emotional decision to sue and more of a business one. Throwing good money after bad in hopes a lawsuit will collect a debt is a colossal waste, if you know you can never do anything with a judgement once you get it.
Supporting documents are required for a lawsuit.
There are situations where actual proof that the debtor owes the debt is somehow unavailable. A judge needs to hang his hat on something when issuing a judgment to a creditor against a debtor, and they want to see proof the debt is owed.
The statute of limitations.
This is a law in place that defines the period within which legal action may be taken. This time frame varies depending on your laws so you would need to check with a licensed professional in your area.
It's far more cost effective for a collection agency to threaten legal action rather then actually spend the human resources, time and money at actually doing it. That's why practically everyone dealing with bill collectors is threatened with a lawsuit at some point in the collection cycle. Collection agencies are masters of empty threats.
Now, don't rest too easy, there are situations where the threat of a lawsuit may be very real. You have to be alert to two points in the collection cycle. The original creditor and the debt buyers.
The collection cycle usually follows this order: Original Creditor --> Collection Agency --> Debt Buyers.
Some original creditors can be litigious. What that means is they are inclined to sue you if they know you have the means to pay the debt and/or you own a home with equity. They may decide to hire a law firm to sue you to secure the debt with a judgement rather then assigning the debt to a collection agency to harass you.
The collection agency is usually (but not always, some creditors skip this step) the second step. The agency is a paid a commission usually ranging from 10-25% of what is collected for the original creditor.
The debt buyers are often the last collection step. It's usually some form of a collection agency that buys debt for a few pennies on the dollar. Because the debt buyer owns the debt, they can do what ever they want with it. I have seen some debt buyers just blindly sue people when there are no assets to satisfy a judgement. It's a really bad business decision but it does happen sometimes. Others won't even spend the time or money, it depends on company policy.
A debt assigned to a collection agency on the other hand is a different story. I would estimate that your chances of actually being sued by a collection agency that has been assigned a debt for collection, is about as good as being struck by a bolt of lightening on relatively clear day. However, it is also fair to say that if you are behind in your payments and owe debt then your chance of being threatened with a lawsuit by bill collectors is nearly as certain as death and taxes.
Debt is tough to deal with; there is no easy way out of it. Seek help if you need it, debt settlement is one of the best alternatives for people dealing with collection agencies because it is fast, effective and has little to no further impact on your credit rating.
Richard Cooper is Founder & CEO at Total Debt Freedom Inc. Canada's most respected debt settlement company. Total Debt Freedom offers debt settlement plans that can save you 40-70% of what you owe and get you debt free in 1 - 3 years. http://www.totaldebtfreedom.ca/
Tuesday, November 4, 2008
Collection Agencies to Stop Using Fake Legal Documents?
In a letter addressing 176 collection agencies in Ontario the Registrar of Collection Agencies appears to be making a change in the way Collection Agencies in Ontario can do business.
In the past collection agencies in Ontario and their lawyers have been successful at collecting money from debtors with “draft” statement of claims. This tactic was effective because it is inexpensive and scary to most people that don’t know any better.
A statement of claim is a court document you must complete and register with the court to start a legal proceeding against someone.
Usually the drafted claim is accompanied by a letter typed on a lawyer’s letterhead and signed by the lawyer. The covering letter will often suggest that the debtor has 10 days to pay their debt by certified funds otherwise a Sheriff may serve the claim upon them. The consequences of a judgement are usually spelled out and it often includes wages being garnished, bank accounts seized and your other property being seized or sold.
“Draft” statement of claims are frightening to people in debt because they look like an official court document suggesting the debtor is about to be sued; but in reality they aren’t worth the paper they are written on because they aren’t registered with the court and in draft form only. It’s basically an empty threat.
At Total Debt Freedom we negotiate a reduction in our client’s debt by 40-70% so we often deal with collection agencies and their attorneys when settling a debt. Draft statement of claims have been a huge concern for many of our clients and we have seen every possible version used. In our experience, only a very small portion of statement of claims sent to debtors are ever actually registered with a court, the majority are in draft form only.
Brian Pitkin, the registrar of the Collection Agencies Act in Ontario states “the practice trades on the expectation that debtors will be unknowledgeable about court processes, and interpret the “draft” statement of claim as a greater commitment to pursuing the matter in court then actually exists; it relies on the debtors not recognizing that the document enclosed with the demand letter is little more than a boiler plate with little investment in time and thought”.
Pitkin finds this collection tactic objectionable and stated that “the practice of enclosing a draft statement of claim is both deceitful and misleading”
This issue is clearly on his radar screen and he warns that further complaints on the matter could result in an order to the collection agency to stop under subsection 2 of section 21 of the Collection Agencies Act by the Registrar himself.
Will the practice of draft statement of claims stop? Maybe; collection agencies are crafty and may find a way to continue using a modified version of these effective collection tactics.
Dealing with collection agencies can be quite stressful if you are unfamiliar with their collection tactics. If you are using a debt help company be sure they are competent enough to differentiate misleading and deceptive collection tactics from the real threats.
In the past collection agencies in Ontario and their lawyers have been successful at collecting money from debtors with “draft” statement of claims. This tactic was effective because it is inexpensive and scary to most people that don’t know any better.
A statement of claim is a court document you must complete and register with the court to start a legal proceeding against someone.
Usually the drafted claim is accompanied by a letter typed on a lawyer’s letterhead and signed by the lawyer. The covering letter will often suggest that the debtor has 10 days to pay their debt by certified funds otherwise a Sheriff may serve the claim upon them. The consequences of a judgement are usually spelled out and it often includes wages being garnished, bank accounts seized and your other property being seized or sold.
“Draft” statement of claims are frightening to people in debt because they look like an official court document suggesting the debtor is about to be sued; but in reality they aren’t worth the paper they are written on because they aren’t registered with the court and in draft form only. It’s basically an empty threat.
At Total Debt Freedom we negotiate a reduction in our client’s debt by 40-70% so we often deal with collection agencies and their attorneys when settling a debt. Draft statement of claims have been a huge concern for many of our clients and we have seen every possible version used. In our experience, only a very small portion of statement of claims sent to debtors are ever actually registered with a court, the majority are in draft form only.
Brian Pitkin, the registrar of the Collection Agencies Act in Ontario states “the practice trades on the expectation that debtors will be unknowledgeable about court processes, and interpret the “draft” statement of claim as a greater commitment to pursuing the matter in court then actually exists; it relies on the debtors not recognizing that the document enclosed with the demand letter is little more than a boiler plate with little investment in time and thought”.
Pitkin finds this collection tactic objectionable and stated that “the practice of enclosing a draft statement of claim is both deceitful and misleading”
This issue is clearly on his radar screen and he warns that further complaints on the matter could result in an order to the collection agency to stop under subsection 2 of section 21 of the Collection Agencies Act by the Registrar himself.
Will the practice of draft statement of claims stop? Maybe; collection agencies are crafty and may find a way to continue using a modified version of these effective collection tactics.
Dealing with collection agencies can be quite stressful if you are unfamiliar with their collection tactics. If you are using a debt help company be sure they are competent enough to differentiate misleading and deceptive collection tactics from the real threats.
Thursday, October 30, 2008
How Facebook Can Get You in Serious Trouble with Bill Collectors
We recently discovered that bill collectors are using popular social networking sites like Facebook and Myspace to dig up very personal information on people in debt.
Recently a bill collector from a collection agency purportedly discovered new employment information published on a Facebook profile they didn’t originally have. Soon enough collection calls and threats of garnishing wages followed at this individual’s place of employment.
It’s probably a good idea to set your social networking profile to “private” in all areas, if a bill collector learns something about you through a social networking site you have no one to blame but yourself for publishing it.
Anyone with a Facebook profile is familiar with status updates; we had a bill collector contact us as we were in the midst of negotiating a massive reduction in an unsecured debt for our client. The bill collector discovered our client was boasting in their status update that they were “thrilled to have a new home”. The bill collector interpreted this as a home purchase; our client was actually intending to tell their friends that they rented a new apartment.
Their argument then became: Why should we take a settlement on our debt if the debtor has money to buy a home? Needless to say it had a crippling effect on our negotiations with that particular creditor and stalled our progress in finalizing a settlement.
Be careful with the internet. If you are using social networking sites, make sure your profile is kept private and keep those nosey bill collectors out of your personal life.
Recently a bill collector from a collection agency purportedly discovered new employment information published on a Facebook profile they didn’t originally have. Soon enough collection calls and threats of garnishing wages followed at this individual’s place of employment.
It’s probably a good idea to set your social networking profile to “private” in all areas, if a bill collector learns something about you through a social networking site you have no one to blame but yourself for publishing it.
Anyone with a Facebook profile is familiar with status updates; we had a bill collector contact us as we were in the midst of negotiating a massive reduction in an unsecured debt for our client. The bill collector discovered our client was boasting in their status update that they were “thrilled to have a new home”. The bill collector interpreted this as a home purchase; our client was actually intending to tell their friends that they rented a new apartment.
Their argument then became: Why should we take a settlement on our debt if the debtor has money to buy a home? Needless to say it had a crippling effect on our negotiations with that particular creditor and stalled our progress in finalizing a settlement.
Be careful with the internet. If you are using social networking sites, make sure your profile is kept private and keep those nosey bill collectors out of your personal life.
Tuesday, May 27, 2008
How To Stop Collection Calls - Part 2 - The Free Option
I recently wrote an article on adopting some practical approaches to help reduce harassing collection calls. My first article on this subject highlighted the use of a call privacy manager from your phone company and a telezapper type of device. In my experience both of these methods can be a highly effective means for dealing with these types of annoying calls. I have also done some further research and tested the free method described below with good results.
What a telezapper essentially does is emit a special information tone ("SIT") when you or your answering machine picks up. The SIT tricks the predictive dialer into thinking your number is not in service and it will usually delete your number from its records. Provided the predictive dialer being used by the collection agency or telemarketers is set to remove telephone numbers from its records when it hears a SIT, you will enjoy many more quiet dinners with your family, and fewer harassing phone calls.
Google "special information tone" and you will find several websites that have SIT information and let you play the tone to hear it.
TIP: You can download this tone for free from many of these websites and record it onto your answering machine prior to your voice mail greeting. If you do this it is a good idea to leave a couple of seconds of dead air between the SIT and your greeting.
This technique is free and can be nearly as effective at stopping collection calls and telemarketer using predictive dialers. The only downside is that that real callers trying to reach you will have to tolerate the SIT before they hear your greeting.
Richard Cooper is Founder & CEO at Total Debt Freedom Inc. Canada's most respected debt settlement company. Total Debt Freedom offers debt settlement plans that can save you 50-70% of what you owe and get you debt free in 1 - 3 years. http://www.totaldebtfreedom.ca
What a telezapper essentially does is emit a special information tone ("SIT") when you or your answering machine picks up. The SIT tricks the predictive dialer into thinking your number is not in service and it will usually delete your number from its records. Provided the predictive dialer being used by the collection agency or telemarketers is set to remove telephone numbers from its records when it hears a SIT, you will enjoy many more quiet dinners with your family, and fewer harassing phone calls.
Google "special information tone" and you will find several websites that have SIT information and let you play the tone to hear it.
TIP: You can download this tone for free from many of these websites and record it onto your answering machine prior to your voice mail greeting. If you do this it is a good idea to leave a couple of seconds of dead air between the SIT and your greeting.
This technique is free and can be nearly as effective at stopping collection calls and telemarketer using predictive dialers. The only downside is that that real callers trying to reach you will have to tolerate the SIT before they hear your greeting.
Richard Cooper is Founder & CEO at Total Debt Freedom Inc. Canada's most respected debt settlement company. Total Debt Freedom offers debt settlement plans that can save you 50-70% of what you owe and get you debt free in 1 - 3 years. http://www.totaldebtfreedom.ca
Wednesday, May 14, 2008
Borrowing Your Way Out of Debt - The Shocking Truth Exposed
The phrase that most people associate with getting out of debt is "debt consolidation". Consolidating debt requires getting a new loan to pay out existing debts. This situation is ideal if you have great credit and can get an interest rate lower then what you are paying right now.
Now there are two types of consolidation loans. Unsecured loans are not secured against an asset and typically have higher interest rates and secured loans (mortgages) are collateral loans and have lower interest rates.
Often the best and easiest way to get a lower interest rate is to get a second mortgage and pay off the debts with the proceeds of that financing. Consolidating your high interest credit card debts into a lower interest second mortgage is smart.
Borrowing unsecured money in the form of a consolidation loan is a very expensive way to pay off debt, you can expect to pay much more then what you borrowed doing things this way. This is a dumb way to get rid of debt but extremely profitable for the lender.
Those with bad credit often make the colossal mistake of getting an unsecured loan at an even higher interest rate unsecured loan then what they are paying now. Unsecured consolidation loans can range from 28-35% interest. Run; don't walk away from these debt consolidation offers. This is not the best solution to debt. You cannot borrow your way out of debt with these types of loans and it is almost always a path to much deeper troubles.
If you are not a homeowner and have bruised credit then getting a consolidation loan with a lower interest rate is probably not an option. Your bank will tell you if they can help or not. Bankruptcy is an option but should only be used as a last resort.
If you do not have any security like a home to put up then your best bet is a debt settlement plan. Provided you owe $10,000 or more in unsecured debt and have steady income. You can get out of debt in 12-36 months; even with the fees you pay, your total cost is usually about half of what you originally owed. Debt settlement plans are highly effective at eliminating debt and should always be considered before bankruptcy if your bank turns you down. What debt settlement does is reduce your debt by about 50-70% before you pay it.
Homeowners with sufficient equity but bad credit can actually get out of debt in about one month. The same principle of debt settlement applies as above, the only difference is the money to settle is available right away and you can get out of debt much sooner.
Debt settlement and mortgage financing is a marriage made in heaven for those in financial hardship, but not all homeowners will qualify.
Talk to a reputable debt settlement company like Total Debt Freedom Inc. and get a free consultation to see if it will work for you.
Richard Cooper is Founder & CEO at Total Debt Freedom Inc. Canada's most respected debt settlement company. Total Debt Freedom offers debt settlement plans that can save you 50-70% of what you owe and get you debt free in 1 - 3 years. http://www.totaldebtfreedom.ca
Now there are two types of consolidation loans. Unsecured loans are not secured against an asset and typically have higher interest rates and secured loans (mortgages) are collateral loans and have lower interest rates.
Often the best and easiest way to get a lower interest rate is to get a second mortgage and pay off the debts with the proceeds of that financing. Consolidating your high interest credit card debts into a lower interest second mortgage is smart.
Borrowing unsecured money in the form of a consolidation loan is a very expensive way to pay off debt, you can expect to pay much more then what you borrowed doing things this way. This is a dumb way to get rid of debt but extremely profitable for the lender.
Those with bad credit often make the colossal mistake of getting an unsecured loan at an even higher interest rate unsecured loan then what they are paying now. Unsecured consolidation loans can range from 28-35% interest. Run; don't walk away from these debt consolidation offers. This is not the best solution to debt. You cannot borrow your way out of debt with these types of loans and it is almost always a path to much deeper troubles.
If you are not a homeowner and have bruised credit then getting a consolidation loan with a lower interest rate is probably not an option. Your bank will tell you if they can help or not. Bankruptcy is an option but should only be used as a last resort.
If you do not have any security like a home to put up then your best bet is a debt settlement plan. Provided you owe $10,000 or more in unsecured debt and have steady income. You can get out of debt in 12-36 months; even with the fees you pay, your total cost is usually about half of what you originally owed. Debt settlement plans are highly effective at eliminating debt and should always be considered before bankruptcy if your bank turns you down. What debt settlement does is reduce your debt by about 50-70% before you pay it.
Homeowners with sufficient equity but bad credit can actually get out of debt in about one month. The same principle of debt settlement applies as above, the only difference is the money to settle is available right away and you can get out of debt much sooner.
Debt settlement and mortgage financing is a marriage made in heaven for those in financial hardship, but not all homeowners will qualify.
Talk to a reputable debt settlement company like Total Debt Freedom Inc. and get a free consultation to see if it will work for you.
Richard Cooper is Founder & CEO at Total Debt Freedom Inc. Canada's most respected debt settlement company. Total Debt Freedom offers debt settlement plans that can save you 50-70% of what you owe and get you debt free in 1 - 3 years. http://www.totaldebtfreedom.ca
How to Stop Collection Calls
Harassing collection calls when you owe debt can be a nightmare. People tell me all the time how relentlessly the phone can ring when they owe money. There is a way to minimize this and actually stop it in most cases.
Adopting these techniques is also effective in stopping the horrible telemarketers that call you every evening offering windows, doors, lawn care and the like.
The first thing you must understand is most collection agencies, telemarketers and banks have adopted predictive dialing systems for making outbound calls. They are highly effective because each agent doesn't have to manually dial a number each time they call out. Instead they will hire 300 collectors for every 1,000 lines that are dialed out. The computer actually dials more numbers then agents available to take the calls. This minimizes time spent dialing numbers and getting disconnected numbers or no answers.
The way it works is when the computerized dialer recognizes a human voice on the receiving end of the call, it immediately connects the call to the first available bill collector. Sometimes there is a delay in the connection because the collectors are busy wrapping up another call, which is why you can sometimes end up saying "hello" several times before you talk to a human.
Your first step you should take is ordering a call privacy feature from your phone company. This feature essentially prompts the inbound caller with a message like "the person you are trying to reach does not accept calls from unknown or private numbers, please state your name before we attempt to connect you". The computer isn't able to state a name so the call drops and the call is not connected. Your phone doesn't even ring.
This feature is offered by almost every phone company and goes by names like: call privacy, anonymous caller ID or anonymous caller rejection. I have looked at several phone providers' websites and the price seems to range from $2/m to $5/m.
The other preventative step you should take is a telezapper. I have tested this myself and they work well. This is a device you attach to your phone. Essentially when you or your answering machine pick up it detects a predictive dialer calling and it plays a tone that tricks the dialer into believing your telephone number is disconnected. The predictive dialer removes the number from its calling list to limit wasting its calling resources at a later date. It is a very effective tool for $39.99 on the telezapper website; I got mine off eBay for $15.
Since the majority of the debt collection calls you will receive are made by a predictive dialer, you will stop collectors and even telemarketers in their tracks. I am not advocating hiding from your payment obligations to your creditors, but adopting these tips will let you fight back and at least give you an opportunity to minimize the collection harassment while you work out a debt elimination strategy.
If you need help getting out of debt, take 15 minutes and get a free consultation from our debt settlement specialists by calling (866) 833-1992 or fill out the form on our website at http://www.totaldebtfreedom.ca to learn more about debt settlement.
Adopting these techniques is also effective in stopping the horrible telemarketers that call you every evening offering windows, doors, lawn care and the like.
The first thing you must understand is most collection agencies, telemarketers and banks have adopted predictive dialing systems for making outbound calls. They are highly effective because each agent doesn't have to manually dial a number each time they call out. Instead they will hire 300 collectors for every 1,000 lines that are dialed out. The computer actually dials more numbers then agents available to take the calls. This minimizes time spent dialing numbers and getting disconnected numbers or no answers.
The way it works is when the computerized dialer recognizes a human voice on the receiving end of the call, it immediately connects the call to the first available bill collector. Sometimes there is a delay in the connection because the collectors are busy wrapping up another call, which is why you can sometimes end up saying "hello" several times before you talk to a human.
Your first step you should take is ordering a call privacy feature from your phone company. This feature essentially prompts the inbound caller with a message like "the person you are trying to reach does not accept calls from unknown or private numbers, please state your name before we attempt to connect you". The computer isn't able to state a name so the call drops and the call is not connected. Your phone doesn't even ring.
This feature is offered by almost every phone company and goes by names like: call privacy, anonymous caller ID or anonymous caller rejection. I have looked at several phone providers' websites and the price seems to range from $2/m to $5/m.
The other preventative step you should take is a telezapper. I have tested this myself and they work well. This is a device you attach to your phone. Essentially when you or your answering machine pick up it detects a predictive dialer calling and it plays a tone that tricks the dialer into believing your telephone number is disconnected. The predictive dialer removes the number from its calling list to limit wasting its calling resources at a later date. It is a very effective tool for $39.99 on the telezapper website; I got mine off eBay for $15.
Since the majority of the debt collection calls you will receive are made by a predictive dialer, you will stop collectors and even telemarketers in their tracks. I am not advocating hiding from your payment obligations to your creditors, but adopting these tips will let you fight back and at least give you an opportunity to minimize the collection harassment while you work out a debt elimination strategy.
If you need help getting out of debt, take 15 minutes and get a free consultation from our debt settlement specialists by calling (866) 833-1992 or fill out the form on our website at http://www.totaldebtfreedom.ca to learn more about debt settlement.
Thursday, April 17, 2008
Banks Can Take Your Money Without Asking - How a Right of Offset Works
The collection of debt is a stressful event. Phone calls, nasty letters and constant threats of legal action are often enough to drive you crazy. Creditors have a trick up their sleeve that most people don't know about, and when it happens it's even more disastrous then an irritating bill collector phone call.
The person in debt to the bank often calls it stealing money. The creditor calls it a right of offset. And it's perfectly legal. A right of offset can be described as: a banks legal right to seize funds that a debtor may have on deposit to cover a loan in default.
In Canada, it happens quite often, and people in debt to their bank are frequently left wondering how they are going to account for this money and get it back. Having money offset from your bank account when your rent or mortgage payment is due can be extremely stressful.
Creditors can take money out of your bank account and in some cases without asking your permission if you are sufficiently delinquent in your payments on a credit card or loan to them. Most of the big banks in Canada have the concept of a right of offset written into their credit card and loan agreements. It's a level of protection you usually give them when you sign for and borrow unsecured money from your bank in the form of a credit card or loan.
Most people are oblivious to this fact and when a regular paycheque goes into your account, it can disappear as quickly as it arrived. Remember your bank can view your cycle of deposits and withdrawals, so they know when to go in and get their money back.
Can you get the money back? Sometimes, the bank will work with you and return it if you can talk to the right person. Your branch manager or the banks Ombudsman can help. But they usually don't have to. There are also in some cases certain restrictions on the types of deposits that can be offset from your account. You should also be aware that if you owe bank "A" a balance on a credit card, they cannot offset money out of an account from bank "B". The account has to be with the same financial institution.
The best protection is not exposing yourself to having money offset from your bank account by staying up to date in loan and credit card payments. But for some people this is not a reality. I know first hand that bad things do happen to good people and that most folks who end up in debt did not intend for it to happen.
There are further steps you can take to protect yourself, not depositing new money into an account you owe credit card or loan debts is a start. But this is not a solution to debt. Seek help from a reputable debt settlement company if you are drowning in debt, and not able to deal with it. But do something today!
Richard Cooper is Founder & CEO at Total Debt Freedom Inc. Canada's most respected debt settlement company. Total Debt Freedom offers debt settlement plans that can save you 50-70% of what you owe and get you debt free in 1 - 3 years.http://www.totaldebtfreedom.ca
The person in debt to the bank often calls it stealing money. The creditor calls it a right of offset. And it's perfectly legal. A right of offset can be described as: a banks legal right to seize funds that a debtor may have on deposit to cover a loan in default.
In Canada, it happens quite often, and people in debt to their bank are frequently left wondering how they are going to account for this money and get it back. Having money offset from your bank account when your rent or mortgage payment is due can be extremely stressful.
Creditors can take money out of your bank account and in some cases without asking your permission if you are sufficiently delinquent in your payments on a credit card or loan to them. Most of the big banks in Canada have the concept of a right of offset written into their credit card and loan agreements. It's a level of protection you usually give them when you sign for and borrow unsecured money from your bank in the form of a credit card or loan.
Most people are oblivious to this fact and when a regular paycheque goes into your account, it can disappear as quickly as it arrived. Remember your bank can view your cycle of deposits and withdrawals, so they know when to go in and get their money back.
Can you get the money back? Sometimes, the bank will work with you and return it if you can talk to the right person. Your branch manager or the banks Ombudsman can help. But they usually don't have to. There are also in some cases certain restrictions on the types of deposits that can be offset from your account. You should also be aware that if you owe bank "A" a balance on a credit card, they cannot offset money out of an account from bank "B". The account has to be with the same financial institution.
The best protection is not exposing yourself to having money offset from your bank account by staying up to date in loan and credit card payments. But for some people this is not a reality. I know first hand that bad things do happen to good people and that most folks who end up in debt did not intend for it to happen.
There are further steps you can take to protect yourself, not depositing new money into an account you owe credit card or loan debts is a start. But this is not a solution to debt. Seek help from a reputable debt settlement company if you are drowning in debt, and not able to deal with it. But do something today!
Richard Cooper is Founder & CEO at Total Debt Freedom Inc. Canada's most respected debt settlement company. Total Debt Freedom offers debt settlement plans that can save you 50-70% of what you owe and get you debt free in 1 - 3 years.http://www.totaldebtfreedom.ca
Monday, March 24, 2008
Legal Action - The Truth Exposed
The people I talk to are always concerned about a lawsuit, I should state first that I am not a lawyer and this article is not legal advice and should not be used as a substitute for the advice provided by a licensed expert. This article is for informational purposes only and based solely on my 14 years of debt management experience.
Anytime you borrow money as a loan or in the form of a credit card you are entering into an agreement. Creditors use high priced lawyers to draft carefully worded agreements so they do not lose their money. You need to understand that ANYTIME you are in breach of a contractual arrangement you are exposing yourself to a lawsuit.
The fact of the matter is there are hundreds of thousands to literally millions of contacts broken for not paying debt daily in North America. The creditors simply do not have the resources or the capacity to sue every person that does not pay.
But they can certainly threaten a lawsuit to everyone that does not pay. Typically a very tiny percent of people ever get sued for not paying their debts, most just get harassed by bill collectors and get nasty collection letters that typically are not worth the paper they are written on.
Launching a lawsuit to collect a debt is generally a business decision and not a personal one. A creditor must incur more debt in the form of legal fees and court costs to even begin the process, not to mention the time needed to gather the evidence and put it all together. In making this decision a creditor will weigh out if it is worth their while to throw more good money after bad trying to collect debt with a lawsuit or just letting collection agencies irritate you hoping to be paid at some point later.
They are not concerned with if they will win or not. If you borrowed the money and did not pay, they will win.
What creditors are concerned with is whether or not they can collect on the judgment once they win. A judgment allows the creditor to take the money from you without asking. It can be in the form of a lien on your home, bank account or garnishment on your wages. But if they have no idea where to collect on a judgment it's a pretty bad business decision to sue someone with nothing.
The 4 main things to consider when launching a lawsuit is:
Can they find you?
This may seem obvious and silly but if they don't know where you are, it's a mistake to waste time and money getting a judgment they can never collect on.
How much is owed?
Generally speaking anything less then $1,000 is a colossal waste of time; they will usually pass on suing these balances. Debts under $10,000 fall under the small claims courts laws in Ontario (check your region) and are fairly easy to sue, they don't consume vast resources. In fact I have seen creditors limit their claim to $10,000 when slightly more is owed so they can take advantage of the small claims court rules. If you owe $10,000 or more it will take much more in the way of resources to obtain a judgment so only those people with sufficient and clear assets to pay a judgment are usually ever considered. But if you do have to answer a lawsuit for $10,000 or more you are liable for a lot more court costs and legal fees incurred.
What assets do you own?
If you are a homeowner with any equity you are a primary target for a lawsuit if you aren't paying your debts, you can't pick up a home and move it. It's great security for a judgment. You can't do any financing or sell it with a lien on the title so it is almost 100% guaranteed to be paid. Cars, boats, household goods, furniture or any other goods that can be moved and hidden are almost never targeted to satisfy a judgment. Another problem with these items is they generally depreciate and are worth next to nothing after factoring the cost to collect and sell them.
Do they know where you work?
Employment income can be garnished. There is no fixed amount of your pay, it's up to the courts to decide but usually less then 20% of your pay is common. The problem here is the creditor must first know where you work, and further to that if you quit your job they are left with nothing unless they can find out where you end up next. Finding out where someone works can be next to impossible sometimes however it can be done. They will also consider the type of job you have, more secure, higher paying, longer running jobs are more attractive to garnish then short term lower paying jobs.
If you are having difficulty in paying your bills and are afraid of a lawsuit, it's probably a good idea to limit your communication until you have sufficient resources available to pay the debts. Bill collectors are very good at probing and getting information from you that can be used later on for a lawsuit. Talking about your job, your home or other assets can only increase your chance of getting sued.
If you owe debt, deal with it. After food, shelter and your basic life needs, paying debt should be your next priority. Sitting on debt longer only costs more, closes doors and limits your options in life. Do it on your own, but if you find the balances keep going north and haven't come down then seek help now. Bankruptcy and Debt Settlement are great options if you owe more then $10,000. Anything less then that is a good candidate for credit counseling. But the bottom line is don't contemplate doing something about it, eliminate it.
Richard Cooper is Founder & CEO at Total Debt Freedom Inc. Canada's most respected debt settlement company. Total Debt Freedom offers debt settlement plans that can save you 50-70% of what you owe and get you debt free in 1 - 3 years. http://www.totaldebtfreedom.ca
Anytime you borrow money as a loan or in the form of a credit card you are entering into an agreement. Creditors use high priced lawyers to draft carefully worded agreements so they do not lose their money. You need to understand that ANYTIME you are in breach of a contractual arrangement you are exposing yourself to a lawsuit.
The fact of the matter is there are hundreds of thousands to literally millions of contacts broken for not paying debt daily in North America. The creditors simply do not have the resources or the capacity to sue every person that does not pay.
But they can certainly threaten a lawsuit to everyone that does not pay. Typically a very tiny percent of people ever get sued for not paying their debts, most just get harassed by bill collectors and get nasty collection letters that typically are not worth the paper they are written on.
Launching a lawsuit to collect a debt is generally a business decision and not a personal one. A creditor must incur more debt in the form of legal fees and court costs to even begin the process, not to mention the time needed to gather the evidence and put it all together. In making this decision a creditor will weigh out if it is worth their while to throw more good money after bad trying to collect debt with a lawsuit or just letting collection agencies irritate you hoping to be paid at some point later.
They are not concerned with if they will win or not. If you borrowed the money and did not pay, they will win.
What creditors are concerned with is whether or not they can collect on the judgment once they win. A judgment allows the creditor to take the money from you without asking. It can be in the form of a lien on your home, bank account or garnishment on your wages. But if they have no idea where to collect on a judgment it's a pretty bad business decision to sue someone with nothing.
The 4 main things to consider when launching a lawsuit is:
Can they find you?
This may seem obvious and silly but if they don't know where you are, it's a mistake to waste time and money getting a judgment they can never collect on.
How much is owed?
Generally speaking anything less then $1,000 is a colossal waste of time; they will usually pass on suing these balances. Debts under $10,000 fall under the small claims courts laws in Ontario (check your region) and are fairly easy to sue, they don't consume vast resources. In fact I have seen creditors limit their claim to $10,000 when slightly more is owed so they can take advantage of the small claims court rules. If you owe $10,000 or more it will take much more in the way of resources to obtain a judgment so only those people with sufficient and clear assets to pay a judgment are usually ever considered. But if you do have to answer a lawsuit for $10,000 or more you are liable for a lot more court costs and legal fees incurred.
What assets do you own?
If you are a homeowner with any equity you are a primary target for a lawsuit if you aren't paying your debts, you can't pick up a home and move it. It's great security for a judgment. You can't do any financing or sell it with a lien on the title so it is almost 100% guaranteed to be paid. Cars, boats, household goods, furniture or any other goods that can be moved and hidden are almost never targeted to satisfy a judgment. Another problem with these items is they generally depreciate and are worth next to nothing after factoring the cost to collect and sell them.
Do they know where you work?
Employment income can be garnished. There is no fixed amount of your pay, it's up to the courts to decide but usually less then 20% of your pay is common. The problem here is the creditor must first know where you work, and further to that if you quit your job they are left with nothing unless they can find out where you end up next. Finding out where someone works can be next to impossible sometimes however it can be done. They will also consider the type of job you have, more secure, higher paying, longer running jobs are more attractive to garnish then short term lower paying jobs.
If you are having difficulty in paying your bills and are afraid of a lawsuit, it's probably a good idea to limit your communication until you have sufficient resources available to pay the debts. Bill collectors are very good at probing and getting information from you that can be used later on for a lawsuit. Talking about your job, your home or other assets can only increase your chance of getting sued.
If you owe debt, deal with it. After food, shelter and your basic life needs, paying debt should be your next priority. Sitting on debt longer only costs more, closes doors and limits your options in life. Do it on your own, but if you find the balances keep going north and haven't come down then seek help now. Bankruptcy and Debt Settlement are great options if you owe more then $10,000. Anything less then that is a good candidate for credit counseling. But the bottom line is don't contemplate doing something about it, eliminate it.
Richard Cooper is Founder & CEO at Total Debt Freedom Inc. Canada's most respected debt settlement company. Total Debt Freedom offers debt settlement plans that can save you 50-70% of what you owe and get you debt free in 1 - 3 years. http://www.totaldebtfreedom.ca
Tuesday, March 18, 2008
Debt Settlement - The Facts
The number one question people ask me when they need debt relief is: does debt settlement ruin my credit rating?
A lot of articles have been published from some sources that claim to be experts on this new method of debt help; so to clear things up, no it wont ruin your credit.
The reason is you can only qualify to settle your debt if you are behind in your required monthly payments so your credit rating has already gone south. Debt settlement hasn't won't ruin your credit, its already bad if you qualify to settle your debt.
If you can afford to make your monthly payments and are up-to-date then why would you consider a settling your debts? Those that can qualify for this type of debt relief will be pleased to know that it is usually the most affordable and fastest way to get rid of your credit card debt.
Debt Settlement is not an option for people with good credit and regularly pay on time, this form of debt help only works when you are already behind and a slow payer. Only those unable to make their payments should consider hiring a debt settlement company.
Usually the worst thing you can do to your credit is file for bankruptcy. Bankruptcy should only ever be considered as a last resort after you have explored and exhausted other methods of debt relief. Second to bankruptcy is credit counselling services (for and not-for profit alike), these plans run on average for 60-72 months, place a R7 on your credit report and do not reduce the principal you owe.
A debt settlement plan will get you out of debt in 1 month if you are a qualified homeowner or in 24-36 months if you are not. Unlike credit counselling and bankruptcy, with a debt settlement company you can still qualify for a mortgage to consolidate the debt you owe and you often pay back about half of what you originally owed. $50,000 in credit card debt could be settled and gone in one month with a $25,000 second mortgage. Hundreds of Canadian's are still in their homes today because debt settlement saved them from going bankrupt. Homeowners should do their homework and ask questions, only deal with a company that is well respected within the mortgage community and has been settling debt with the proceeds of mortgage financing for several years.
Remember there is no form of debt help that offers an immediate improvement to your credit score and you can only qualify to settle your debt if you are behind. Negotiating settlements on your debts does the least amount of damage only because it wipes out debt the fastest. In the last several years I have seen many people on the verge of bankruptcy actually improve their credit score by around 20% in 12 months if they have sufficient equity in their home to settle their credit card debt with a mortgage. Once you have cleared up the mess it's important to follow some important steps so you can build your credit score. Any good debt settlement company that assists homeowners will provide this knowledge for free.
The best way to have a good credit rating is to pay your bills in full every month and not carry a balance. If you have to carry a balance always keep it below 50% of your credit limit otherwise even if you make the minimum required payment your credit score will start going south. If you are suffering financially then debt settlement will always be the quickest path to total debt freedom and do the least amount of damage to your credit rating.
Richard Cooper is Founder & CEO for Total Debt Freedom Inc. Canada's most respected debt settlement company. Originally conceived for the mortgage community in 2003 to help fund more sub-prime mortgages and fix turn downs due to bad credit; Total Debt Freedom also offers debt settlement plans up to 36 months for those that aren't homeowners. http://www.totaldebtfreedom.ca
A lot of articles have been published from some sources that claim to be experts on this new method of debt help; so to clear things up, no it wont ruin your credit.
The reason is you can only qualify to settle your debt if you are behind in your required monthly payments so your credit rating has already gone south. Debt settlement hasn't won't ruin your credit, its already bad if you qualify to settle your debt.
If you can afford to make your monthly payments and are up-to-date then why would you consider a settling your debts? Those that can qualify for this type of debt relief will be pleased to know that it is usually the most affordable and fastest way to get rid of your credit card debt.
Debt Settlement is not an option for people with good credit and regularly pay on time, this form of debt help only works when you are already behind and a slow payer. Only those unable to make their payments should consider hiring a debt settlement company.
Usually the worst thing you can do to your credit is file for bankruptcy. Bankruptcy should only ever be considered as a last resort after you have explored and exhausted other methods of debt relief. Second to bankruptcy is credit counselling services (for and not-for profit alike), these plans run on average for 60-72 months, place a R7 on your credit report and do not reduce the principal you owe.
A debt settlement plan will get you out of debt in 1 month if you are a qualified homeowner or in 24-36 months if you are not. Unlike credit counselling and bankruptcy, with a debt settlement company you can still qualify for a mortgage to consolidate the debt you owe and you often pay back about half of what you originally owed. $50,000 in credit card debt could be settled and gone in one month with a $25,000 second mortgage. Hundreds of Canadian's are still in their homes today because debt settlement saved them from going bankrupt. Homeowners should do their homework and ask questions, only deal with a company that is well respected within the mortgage community and has been settling debt with the proceeds of mortgage financing for several years.
Remember there is no form of debt help that offers an immediate improvement to your credit score and you can only qualify to settle your debt if you are behind. Negotiating settlements on your debts does the least amount of damage only because it wipes out debt the fastest. In the last several years I have seen many people on the verge of bankruptcy actually improve their credit score by around 20% in 12 months if they have sufficient equity in their home to settle their credit card debt with a mortgage. Once you have cleared up the mess it's important to follow some important steps so you can build your credit score. Any good debt settlement company that assists homeowners will provide this knowledge for free.
The best way to have a good credit rating is to pay your bills in full every month and not carry a balance. If you have to carry a balance always keep it below 50% of your credit limit otherwise even if you make the minimum required payment your credit score will start going south. If you are suffering financially then debt settlement will always be the quickest path to total debt freedom and do the least amount of damage to your credit rating.
Richard Cooper is Founder & CEO for Total Debt Freedom Inc. Canada's most respected debt settlement company. Originally conceived for the mortgage community in 2003 to help fund more sub-prime mortgages and fix turn downs due to bad credit; Total Debt Freedom also offers debt settlement plans up to 36 months for those that aren't homeowners. http://www.totaldebtfreedom.ca
Credit Counseling - What You Need to Know Before You Sign up
On the one hand, credit counselling can be a good way to resolve debt while avoiding bankruptcy. On the other hand, it can be like an onion; once you peel back the layers, you may cry after you see what you are doing.
Consumer credit counselling service companies organize themselves as either for-profit or not-for-profit. Recently, not-for-profit Credit Counselling in America has been in the media and under the spotlight of the Internal Revenue Service ("IRS"). The IRS has cracked down on some of the industry's biggest players. Forty-one credit counselling companies had their tax exempt (not-for-profit) status revoked; they found that many companies didn't offer the level of counselling or education required in order to qualify for a tax-exempt status.
What credit counselling companies do (regardless of profit status) is arrange for you to pay back your full principal balance(s) on terms that are easier for you to service such as a longer amortization term and/or a reduced interest rate. What this means is that if you owe $10,000 and you are paying an average of 15% interest on all your debts, you will still owe $10,000 but they will hopefully reduce your interest rate to at least half of your original rate and set more affordable payments usually over a longer period of time. Provided you can afford the entire plan and fees, you will be debt free at some point. Remember not-for-profit does not mean free, they still charge you a fee.
You can actually call your creditor and do this yourself on your own at no cost. Most banks have their own internal counsellors that you can negotiate payment terms with that are more within your budget but this has to be done before the debt is assigned to a collection agency.
Credit counselling is reported to your credit report as a R7 and viewed negatively by every credit grantor. As a result, if you are in a 7 year repayment plan, don't count on using credit cards, getting a car loan or mortgage for the next 7 years plus the time it takes you to re-establish your credit rating.
The origin of credit counselling goes back to the 1980's when grantors got together and created it in order to recover money from people in debt. The new consumer credit counselling banner at the time was distanced from the credit grantors under a friendlier not-for-profit status which created trust and it worked well with the public. People signed up in droves and for-profit companies followed suit shortly there-after.
If you owe less then $10,000, credit counselling probably isn't a bad idea and a good alternative to bankruptcy. However, people still fail at these plans because they take a long time and a lot of money is consumed by maintenance fees over several years.
A new entry to the debt management marketplace has been debt settlement. Debt settlement has been a popular option in America and the movement has been gathering momentum in Canada. Unlike credit counselling, debt settlement actually reduces the principal balance owed by you to around 40%-70% of your original principal balance. A credit counselling service doesn't do that, it only freezes or reduces your interest rate.
If you owe more than you can manage, consider debt settlement as an option. It's an excellent opportunity to wipe out your debt quickly while saving you a substantial amount of money without doing the same damage to your credit rating as bankruptcy would. I have seen people with $50,000 of debt totally debt free in as little as 30 days if they have the right resources. Others may take up to 36 months depending on their ability to settle. Debt settlement companies are also an agent acting in your best interest and are not directed or managed by the very same people you owe the way that credit counselling companies are. In most cases, the fees of debt settlement companies are based on the money you save so that means they are working to save you as much as possible. See http://totaldebtfreedom.ca/ for more information on debt settlement.
Richard Cooper is Founder & CEO for Total Debt Freedom Inc. Canada's most respected debt settlement company. Originally conceived for the mortgage community in 2003 to help fund more sub-prime mortgages and fix turn downs due to bad credit; Total Debt Freedom also offers debt settlement plans up to 36 months for those that aren't homeowners. http://www.totaldebtfreedom.ca
Consumer credit counselling service companies organize themselves as either for-profit or not-for-profit. Recently, not-for-profit Credit Counselling in America has been in the media and under the spotlight of the Internal Revenue Service ("IRS"). The IRS has cracked down on some of the industry's biggest players. Forty-one credit counselling companies had their tax exempt (not-for-profit) status revoked; they found that many companies didn't offer the level of counselling or education required in order to qualify for a tax-exempt status.
What credit counselling companies do (regardless of profit status) is arrange for you to pay back your full principal balance(s) on terms that are easier for you to service such as a longer amortization term and/or a reduced interest rate. What this means is that if you owe $10,000 and you are paying an average of 15% interest on all your debts, you will still owe $10,000 but they will hopefully reduce your interest rate to at least half of your original rate and set more affordable payments usually over a longer period of time. Provided you can afford the entire plan and fees, you will be debt free at some point. Remember not-for-profit does not mean free, they still charge you a fee.
You can actually call your creditor and do this yourself on your own at no cost. Most banks have their own internal counsellors that you can negotiate payment terms with that are more within your budget but this has to be done before the debt is assigned to a collection agency.
Credit counselling is reported to your credit report as a R7 and viewed negatively by every credit grantor. As a result, if you are in a 7 year repayment plan, don't count on using credit cards, getting a car loan or mortgage for the next 7 years plus the time it takes you to re-establish your credit rating.
The origin of credit counselling goes back to the 1980's when grantors got together and created it in order to recover money from people in debt. The new consumer credit counselling banner at the time was distanced from the credit grantors under a friendlier not-for-profit status which created trust and it worked well with the public. People signed up in droves and for-profit companies followed suit shortly there-after.
If you owe less then $10,000, credit counselling probably isn't a bad idea and a good alternative to bankruptcy. However, people still fail at these plans because they take a long time and a lot of money is consumed by maintenance fees over several years.
A new entry to the debt management marketplace has been debt settlement. Debt settlement has been a popular option in America and the movement has been gathering momentum in Canada. Unlike credit counselling, debt settlement actually reduces the principal balance owed by you to around 40%-70% of your original principal balance. A credit counselling service doesn't do that, it only freezes or reduces your interest rate.
If you owe more than you can manage, consider debt settlement as an option. It's an excellent opportunity to wipe out your debt quickly while saving you a substantial amount of money without doing the same damage to your credit rating as bankruptcy would. I have seen people with $50,000 of debt totally debt free in as little as 30 days if they have the right resources. Others may take up to 36 months depending on their ability to settle. Debt settlement companies are also an agent acting in your best interest and are not directed or managed by the very same people you owe the way that credit counselling companies are. In most cases, the fees of debt settlement companies are based on the money you save so that means they are working to save you as much as possible. See http://totaldebtfreedom.ca/ for more information on debt settlement.
Richard Cooper is Founder & CEO for Total Debt Freedom Inc. Canada's most respected debt settlement company. Originally conceived for the mortgage community in 2003 to help fund more sub-prime mortgages and fix turn downs due to bad credit; Total Debt Freedom also offers debt settlement plans up to 36 months for those that aren't homeowners. http://www.totaldebtfreedom.ca
Credit Card Offers - Using Promotional Offers To Pay Off Debt
Beware of the special and introductory offers at ridiculously low interest rates. It's generally a bad idea to use credit cards to consolidate debt. I get bombarded with offers of anywhere from 1.99% - 4.99% credit cards all the time.
With 5 year mortgage rates hovering in the 5.99% range today for people with perfect credit how can credit card companies afford to offer a 1.99% rate on an unsecured credit card? They can but only in the short term to get your business.
I read the fine print on the back and the promotional rate only lasts for 9 months after which it goes up to the non-promotional interest rate of 19.99%. One offer didn't even tell me what the non-promotional rate was on the mailed offer; I had to look it up on their website to find out. In many cases promotional interest rates are based only on balance transfers; what that means is you only get the lower interest rate if you move other credit card balances to the new card being offered.
Be careful and do your homework, we have seen many people lured by special offers only to find when the promotional period ends so do their chances of paying off the debt.
People can get into trouble if they don't read the fine print and see what they are signing up for; when things appear to be too good to be true they usually are.
For credit cards follow these simple rules of thumb and (1) never charge anything to a credit card you cannot afford to pay off in full when you get the bill. (2) Credit cards and promotional offers should never be used to finance a lifestyle you cannot afford. (3) Live within your means and save money every month, rainy days do come and sometimes when it rains it pours so it's a good idea to have 3 months salary in the bank.
If you are drowning in debt, pay it off. If you can't and need help then look for the assistance of a reputable debt settlement company that will take the time to provide a free assessment on your situation.
Richard Cooper is Founder & CEO for Total Debt Freedom Inc. Canada's most respected debt settlement company. Originally conceived for the mortgage community in 2003 to help fund more sub-prime mortgages and fix turn downs due to bad credit; Total Debt Freedom also offers debt settlement plans up to 36 months for those that aren't homeowners. http://www.totaldebtfreedom.ca
With 5 year mortgage rates hovering in the 5.99% range today for people with perfect credit how can credit card companies afford to offer a 1.99% rate on an unsecured credit card? They can but only in the short term to get your business.
I read the fine print on the back and the promotional rate only lasts for 9 months after which it goes up to the non-promotional interest rate of 19.99%. One offer didn't even tell me what the non-promotional rate was on the mailed offer; I had to look it up on their website to find out. In many cases promotional interest rates are based only on balance transfers; what that means is you only get the lower interest rate if you move other credit card balances to the new card being offered.
Be careful and do your homework, we have seen many people lured by special offers only to find when the promotional period ends so do their chances of paying off the debt.
People can get into trouble if they don't read the fine print and see what they are signing up for; when things appear to be too good to be true they usually are.
For credit cards follow these simple rules of thumb and (1) never charge anything to a credit card you cannot afford to pay off in full when you get the bill. (2) Credit cards and promotional offers should never be used to finance a lifestyle you cannot afford. (3) Live within your means and save money every month, rainy days do come and sometimes when it rains it pours so it's a good idea to have 3 months salary in the bank.
If you are drowning in debt, pay it off. If you can't and need help then look for the assistance of a reputable debt settlement company that will take the time to provide a free assessment on your situation.
Richard Cooper is Founder & CEO for Total Debt Freedom Inc. Canada's most respected debt settlement company. Originally conceived for the mortgage community in 2003 to help fund more sub-prime mortgages and fix turn downs due to bad credit; Total Debt Freedom also offers debt settlement plans up to 36 months for those that aren't homeowners. http://www.totaldebtfreedom.ca
Filing Bankruptcy in Canada - Shocking Facts Most People Don't Know About
Bankruptcy can sometimes be your best way out of an overwhelming debt situation but you should consider how the law forces a Trustee in Bankruptcy to operate in Canada.
The bankruptcy process must be administered by a Trustee in Bankruptcy. Most Trustee's have both an accounting designation and a university degree. They must also pass a bankruptcy and law course. When considering filing for bankruptcy, always deal with a licensed trustee; that is, a trustee who has obtained a license from the Superintendent in Bankruptcy pursuant to the Bankruptcy and Insolvency Act (Canada).
What most people don't know is that even though you pay a Trustee for filing an assignment in bankruptcy, they are working on behalf of the creditors that you owe. That means even though you pay the Trustee to provide a fresh start for you, they are essentially an appointed agent for the creditors and looking after the best interest of the people that you owe. The Trustee works towards returning the creditors money back through the assets you hand over during the bankruptcy process.
You will present all of your debts and most of your assets to the Trustee. Very little of your assets are exempt from bankruptcy. In Ontario for example, you may keep your car if it is worth less than $5,650, necessary and ordinary wearing apparel up to $5,650, certain tools up to $11,300 if required by your trade, up to $11,300 of furnishings and certain types of life insurance. Most of your other assets are available for seizure and may be lost including your home, and your investments (except RRSP's and pension plans in certain cases). As a result, always consider doing everything you possibly can do to avoid going bankrupt.
If you owe more then $10,000 and your debts have been listed to a collection agency, consider debt settlement as an option. A debt settlement company can help avoid bankruptcy and works towards stopping collection calls by acting as your agent and negotiating a settlement with your creditors. It is an excellent way for you to wipe out your debt fast while saving you a substantial amount of money. In most cases you pay back about half of what you originally owed the creditors and that should include the fees. I have seen people achieve total debt freedom in as little as 30 days if they have access to a lump sum of money; anyone who is a homeowner or has family willing to help should definitely consider this option. Others may take 24-36 months to settle their debt. Unlike a Trustee a debt settlement company is acting for you only; in most cases fees charged are based on the money you save. That means that they will work to save you as much as possible. See http://totaldebtfreedom.ca/ for more information on debt settlement in Canada.
Always look at all of your options when considering bankruptcy. Generally speaking, if you suffer from financial hardship, have very limited income and most of your assets qualify as being exempt from bankruptcy seizure, then it's a good idea for you to get a free consultation from a Trustee about going bankrupt.
Don't be afraid of dealing with your debt. Sometimes bad things do happen to good people or maybe you just made some bad choices in life. We are only human. The worst mistake you can make is putting it off. Either way if you choose debt settlement or bankruptcy, start your path to debt freedom as soon as you can and get on with living life totally debt free.
Richard Cooper is Founder & CEO for Total Debt Freedom Inc. Canada's most respected debt settlement company. Originally conceived for the mortgage community in 2003 to help fund more sub-prime mortgages and fix turn downs due to bad credit; Total Debt Freedom also offers debt settlement plans up to 36 months for those that aren't homeowners. http://www.totaldebtfreedom.ca
The bankruptcy process must be administered by a Trustee in Bankruptcy. Most Trustee's have both an accounting designation and a university degree. They must also pass a bankruptcy and law course. When considering filing for bankruptcy, always deal with a licensed trustee; that is, a trustee who has obtained a license from the Superintendent in Bankruptcy pursuant to the Bankruptcy and Insolvency Act (Canada).
What most people don't know is that even though you pay a Trustee for filing an assignment in bankruptcy, they are working on behalf of the creditors that you owe. That means even though you pay the Trustee to provide a fresh start for you, they are essentially an appointed agent for the creditors and looking after the best interest of the people that you owe. The Trustee works towards returning the creditors money back through the assets you hand over during the bankruptcy process.
You will present all of your debts and most of your assets to the Trustee. Very little of your assets are exempt from bankruptcy. In Ontario for example, you may keep your car if it is worth less than $5,650, necessary and ordinary wearing apparel up to $5,650, certain tools up to $11,300 if required by your trade, up to $11,300 of furnishings and certain types of life insurance. Most of your other assets are available for seizure and may be lost including your home, and your investments (except RRSP's and pension plans in certain cases). As a result, always consider doing everything you possibly can do to avoid going bankrupt.
If you owe more then $10,000 and your debts have been listed to a collection agency, consider debt settlement as an option. A debt settlement company can help avoid bankruptcy and works towards stopping collection calls by acting as your agent and negotiating a settlement with your creditors. It is an excellent way for you to wipe out your debt fast while saving you a substantial amount of money. In most cases you pay back about half of what you originally owed the creditors and that should include the fees. I have seen people achieve total debt freedom in as little as 30 days if they have access to a lump sum of money; anyone who is a homeowner or has family willing to help should definitely consider this option. Others may take 24-36 months to settle their debt. Unlike a Trustee a debt settlement company is acting for you only; in most cases fees charged are based on the money you save. That means that they will work to save you as much as possible. See http://totaldebtfreedom.ca/ for more information on debt settlement in Canada.
Always look at all of your options when considering bankruptcy. Generally speaking, if you suffer from financial hardship, have very limited income and most of your assets qualify as being exempt from bankruptcy seizure, then it's a good idea for you to get a free consultation from a Trustee about going bankrupt.
Don't be afraid of dealing with your debt. Sometimes bad things do happen to good people or maybe you just made some bad choices in life. We are only human. The worst mistake you can make is putting it off. Either way if you choose debt settlement or bankruptcy, start your path to debt freedom as soon as you can and get on with living life totally debt free.
Richard Cooper is Founder & CEO for Total Debt Freedom Inc. Canada's most respected debt settlement company. Originally conceived for the mortgage community in 2003 to help fund more sub-prime mortgages and fix turn downs due to bad credit; Total Debt Freedom also offers debt settlement plans up to 36 months for those that aren't homeowners. http://www.totaldebtfreedom.ca
Subscribe to:
Posts (Atom)
