TABLE OF CONTENTS

Chapter 1 – I Got Hit in the Head With a Baseball and I Saw it Coming
Chapter 2 – What Your Money is Trying to Tell You
Chapter 3 – Take a Lap on the Gerbil Wheel of Debt
Chapter 4 – Why Money Doesn’t Make You Happy
Chapter 5 – If You Had a Million Rats, Would You be Successful?
Chapter 6 – The 10 Attributes of Internal Prosperity
Chapter 7 – The Attributes of Internal Prosperity in Action
Chapter 8 – Your Money is Your Friend
Conclusion – Listen to Your Heart

Chapter 3 – Take a Lap on the Gerbil Wheel of Debt

Think of debt as that annoying squeak in the back seat that you hear as you drive alone in the car. The squeak distracts you from the beauty of the scenery, and before you know it, you are only worried about the squeak. I knew a guy that bought his dream car, a brand new Volvo, and was enjoying showing it off to everyone. About a week after he bought it, it was totaled. He was driving with the windows down, just enjoying the day, and a bee flew in the window. He was so focused on getting rid of the bee that he ran off the road and hit a bridge support post. He just lost focus on what was most important. The goodnews is that he survived without major injuries and the bee vanished. The bad news is that his insurance did not cover the entire new loan on his car and he was unable to buy another dream car.

When you are in debt, you are mortgaging your future. What you are doing is promising to generate money in the future to pay off what you have in your hands today.

Too much debt means your future is locked down. It robs you of options and flexibility. It means that you become a slave to your creditors and have to work at some job, even if you hate it, to make enough money to pay off what you owe. If you wake up in the morning and you are thinking about how much you hate going to work, you’re clutched in the mouth of the monster of debt. You’ve got saliva dripping off your feet, and in a minute or two you are going down the gullet, never to be heard from again.

It doesn’t have to be that way. You can break free. It is possible for you to wake up almost every morning and look forward to the day with childish glee and anticipation. I’d say I feel that way most of the time because I love what I do and I’m thankful for any day I’m not dead. As far as I’m concerned, that’s a good day.

So what happens when you get deep in debt is you sacrifice your future. That’s all, nothing much. Now, not all debt is bad. If you love what you do and you make enough money to pay your bills and have a bunch of money leftover, it’s not such a drag on your life. However, if you are generally unhappy with yourself, your life, your reality, then debt can just be a new pair of cement slippers.

People are frequently worried about debt — whether they have too much or what is the “right” amount. They worry if they have financial problems, they hear about “good debt” and “bad debt” and don’t know the difference. I’ve developed this simple way to determine if money is a problem in your life…it’s just not that complicated. Here is a quick test to see if you are having financial problems.

“STEVEISM:” IF YOU THINK YOU HAVE A FINANCIAL PROBLEM, YOU DO

That goes for debt, too. If you think you have too much debt, well, you do.

If you had to think about debt as something, would it be an anchor around your neck? The cement slippers I just mentioned? How about a gerbil? Stick with me here. Do you know what a gerbil is? It’s a small rodent about five inches long with hairless ears, large black eyes, pointed snout, short legs, clawed feet, light-colored fur and a long tail.

Sounds like a new character in the next Stephen King thriller, doesn’t it?

For some twisted reason, many kids keep gerbils as pets. They are much cuter than they sound and they kind of remind me of the Tribbles on that old Star Trek episode.

I had some gerbils as pets when I was but a young lad. They lived in an old aquarium, the one that leaked so it wasn’t any good for fish.

It was an accident that my gerbils were of opposite sex. Boy, did those things breed. I guess when you are caged up in an old 10-gallon aquarium all day long there isn’t much to do but chew everything you can and breed. They did both very well. Siskel and Ebert would have given them two thumbs up.

I got tired of them procreating all the time, so a friend suggested putting a gerbil wheel in the cage to keep them busy. It wasn’t enough of a distraction to keep them from breeding all the time but they now had something new to annoy the heck out of me.

A gerbil wheel is a cheap metal wheel that is mounted in a cheap metal frame and when they get on it and run, it just rotates around and around and around. They go nowhere fast. I’m not sure what the purpose is. Exercise? Distraction? To keep me up at night? Who knew gerbils are nocturnal? They wake up from napping all day and jump into the wheel just as you doze off to sleep. The wheel always seems to have a squeak and, of course they knock it over or it bangs against the glass all night. Squeak, bang, squeak, bang, squeak, bang.

I always wondered two things. First, would I get in trouble if I heaved the whole damn aquarium out the window, and two, don’t Fred and Ethel realize that the wheel just spins constantly but goes nowhere? I have to give them bonus points for dedication and creativity. Sometimes they would get that wheel banging and spinning so fast I thought either the side was going to bust out of the tank or they were going to make electricity.

Every once in a while they’d have a spat and both get on the wheel and try to run in opposite directions. That was interesting.

I tried to take the wheel out of the cage one night to stop the madness. I think one of them sunk their teeth deep into my flesh and took a huge chunk out of my hand as I reached for the wheel. Blood poured down my hand, ran down my arm and dripped off my elbow as I held my arm up and ran back to bed. At least that’s how I saw it as an 11-year-old. They probably just brushed against my hand. Anyway, sticking my hand in the cage in the middle of the night freaked me out, so I tried to keep late-night commando raids into the tank at a minimum.

The whole point about the gerbil wheel is that they found nothing wrong with running in place and going nowhere. They listened to the same glass banging and squeaking that I did; I know this because they have keen hearing. I’m sure they got very used to it. That was just their universe. They obviously enjoyed all of the running in place and going nowhere.

Credit and debt are a lot like a gerbil wheel for many people. No matter how much you make, you just keep making payments every month. We decide, or are trained early in life to expect that, as adults, we earn money and make payments. “What do you mean you don’t make payments each month? What the heck is wrong with you?”

A couple of times in life we wake up in a panic and realize we don’t have enough money. For most people those times are when we get married, the day before our child leaves for college and a week after we retire. But for the most part we are happy and content to keep earning and spending, earning and spending, earning and spending.

Life becomes this comfortable hum of making money and never having enough. Can’t you picture a human-sized gerbil wheel with a huge sign stuck in the ground right in front of the wheel that says, “If you can touch this you will make good money.” Many people would run on that wheel all day long chasing the dream, stopping to earn a little money, spend some and then sleep. You know I’ve never quite figured out what “good money” is, but everybody seems to use the term. “I’ll be happy as soon as John lands this job.

We’ll be making good money then.” As far as I’m concerned, all the money I make is good.

STEP AWAY FROM THE WHEEL

Our consumer society is set up like a huge gerbil wheel. We are trained by our parents and environment to be good consumers when we grow up. Can we really be surprised that we do it so well or to excess? If you buy into that whole belief that you are what you own and that more is going to be enough, you will run and run and run your entire life and you will wind up in the same spot, just older, tired and still unhappy.

Here is my sage advice, “Step away from the wheel.” Can’t you picture the prosperity police pulling you over in a felony stop as you race down the road running in your gerbil wheel. “Mr. Rhode, put your hands in the air and step away from the wheel.” They’d force you to come to your senses, taking you away in handcuffs made of recycled credit cards. Platinum cuffs, please.

The perpetual cycle of debt will not make you a better person. The race for wealth will not make you happier. There are people who have 10 million dollars in the bank who don’t feel like they have enough. Enough will never be enough. Enough, already, of this enough stuff. Enough!

You are not what you make, you are not what you spend, you are not what you buy, you are not what you give, you are not your reflection and you are not the size of your pants. You are you and that can be pretty terrific if you let it.

Your creditors are not trying to keep you enslaved on the gerbil wheel of debt. You do that all yourself. You constantly seek out more stuff. “If I only had that new outfit or golf bag, I’d be happy.” Yeh, right! Don’t you see it’s not the thing that you desire that will make you happier; purchasing the thing is just an escape from the way you feel inside.

Money isn’t your problem. You are your problem. But like most problems, if you apply a willingness to change the situation, good guidance and a plan, you can have a good chance at changing things up. You might try and fail. If you do, stop complaining and try again.

TEN THINGS YOU SHOULD DO AFTER YOU FAIL:

1. Take a break. Play a video game, read, listen to calming music, watch TV, go for a walk alone or do anything else you can, alone. Take a few minutes or hours to let the frustration die down a bit. You’ve probably been working hard or you’ve been distracted, and that could have contributed to your failure. The reason you need some quiet time rather than going to “twofer” night at the bar with your friends, is that you need to let all of those thoughts about the experience filter out of the crevices in your brain. You don’t need a distraction to mask what you just went through. Let it silently percolate.
2. Jot down or think about the factors that you think contributed to your failure.
3. Jot down or think about what you could have done to avoid those factors in the future.
4. Admit defeat. Stop pretending that you didn’t fail. You failed. Too bad, so sad. Move on. I’ve had too many clients over the years that insist on reliving their past mistakes over and over again. Let them go. The key is that they were mistakes and they were in the past.
5. Decide if you want to try and pursue that goal again. Was it worth it, or is the luster gone? Sometimes the moment has passed and it’s time to move on. “Next.”
6. Regroup. If you are going to try to achieve the same goal again, think about what additional resources or people you are going to need to help you. Identify what those resources are and gather them together. Before you move forward, consider what the new cost will be with the required time and materials. Is the goal worth the true cost of what it will take to achieve the end result?
7. Failure is only success masked in defeat. Some part of what you attempted was good. Figure out what that was and do that part again. No sense reinventing the wheel.
8. Admit that what you attempted was a failure, not you. You are not an idiot or stupid for failing. You are courageous for trying.
9. Remember that sometimes no matter how good the effort, the passion and desire, life just doesn’t play ball. Sometimes you win and sometimes you lose for no good reason. As the song goes, sometimes you’re the windshield; sometimes you’re the bug. Life is what it is.
10. Figure out what good can come from your failure. There is tremendous value in failing as long as you can analyze what went wrong. Don’t waste a perfectly good failure by trying to forget it. Learn from it. Both the recipe for Kentucky Fried Chicken and the light bulb were successes at the end of massive and repeated failures. And just think, today they actually make an oven that can cook chicken with light. If those inventors didn’t keep trying, imagine what we would be eating in the dark? Once you’ve analyzed that experience, let go of any negative baggage you are carrying from that past experience, just keep the good. Remember that the most important minute in your life is the one you are living right now. It’s the only real minute of your life. Unfortunately, we often let our past predict the future because we are stuck living in other minutes. They are no longer real. Let go. Live now.

I’VE SEEN CREDITORS, AND THEY IS US

Creditors are, well, us. People who work for lenders as debt collectors are in the exact same boat you are in, they just have a different job. I remember one client who said she had been getting the same call from the same collector for months. The collector hadn’t been very nice in the past and when she called again, she dreaded the call. Finally, the client admitted to the collector that she was working with Myvesta and the collector stopped, paused and said, “I am too. Aren’t they great?” The whole relationship changed from that day forward.

The only reason creditors keep providing us with the credit we so desperately want is that we crave it. Somehow we have to figure out a way to get off the gerbil wheel of debt. Until then, I think the person next door has a nicer wheel than yours. What are you going to do about it?

Next

Chapter 4 – Why Money Doesn’t Make You Happy

Other Related Articles to Read

• Chapter 8 – Your Money is Your Friend
• “How Do I Go About Making My Credit Score Better” – Antoine
• Mark Writes In “I Need to Go Bankrupt in the UK”
• What to Do if Your Creditors And Bill Collectors Make You Really Angry
• Diane Writes In “I Want to Settle My Debt. My Creditor Wants to Take Me to Court.”
• Five Inside Truths About Debt Management Plans (DMP) You Need to Know
• Chapter 1 – I Got Hit in the Head With a Baseball and I Saw it Coming
• Chapter 2 – What Your Money is Trying to Tell You
• Chapter 4 – Why Money Doesn’t Make You Happy
• Chapter 5 – If You Had a Million Rats, Would You be Successful?

Read the full article at GetOutOfDebt.org, click here: Chapter 3 – Take a Lap on the Gerbil Wheel of Debt

Antoine writes in to the Get Out of Debt Squirrel and asks:

I don’t have credit card dept of any kind. I’ve never filed bankruptcy. I have bills on my credit report some of them I’m unaware of and the others are overdue bills. How do I go about solving the problem to get it off my credit report? How can I make my score go up? Please help me.

Antoine, Never Fear, the Get Out of Debt Squirrel is Here. Yeah I know, corny. But I just had to say it.

Tackling a bad credit score is both easy and important to do. A bad credit score can hold you back from cheap insurance rates and access to cheaper credit. A bad credit score and and a bad credit report give you higher monthly payments. Let me put it this way, I can’t think of a single advantage to having a bad credit report.

Legally Improving Your Credit Report is Easy

Armed with the right information and the right tools it can be easy to improve your credit report. Now doing this will cost you a little bit but better to make a small investment to get a big reward, much better credit.

Stop Fooling Around The first step is to stop fooling around with all those free credit reports you hear about and just go straight for the gold standard in credit reports. A really good consolidated credit report, like you can get online here, will give you all the information you need to know to:

1. Identify your creditors.

2. Compare each of the three major credit reports side-by-side to see who is actually saying what about you.
3. Using the creditor contact information on the credit report you can contact those you don’t recognize to either make payment arrangements or settle the debt in full.
4. If there is any information on your credit report which is not correct, the credit report will give you the information you need to contact each individual credit bureau and ask to have that information removed.

Legally Improving Your Credit Score is Easy

Online credit score tools will easily show you what changes you need to make to improve your credit score. With the right credit score tools you can see how much your score will improve by repaying certain creditors or doing specific things like closing credit or getting credit. Since the mac daddy of credit scores is the FICO score, don’t mess around, go to them and get your score online now to best model how to improve your credit score. That’s what I do.

The FICO folks even provide a free credit score estimator you can use online.

You’re Almost Done, But Not Yet

As crazy as tis sounds Antoine, you need to get some new good credit to add to your credit report. Without new good credit to add it will be hard to neutralize your past credit transgressions. Don’t apply for a gas card or store credit card, those only bring down your score.

Instead go for one of these easier to get major credit cards to get back in the credit game, get it reported to the credit bureaus and starting making your credit report and credit score look as spotless as it possibly can.

Take a look at these cards of an example of what I’m talking about. You can also find more here in the credit card section.

Do You Have a Question for the Squirrel?

If you would like to ask a question, don’t be shy, ask it online here.

Other Related Articles to Read

• Lauren is Searching For Ways to Get Out Of Debt And Make Her Bad Credit Go Away
• Jennifer Says “We Have Accumulated So Much Debt And Bad Credit. What Do We Do?”
• Credit Scoring is a Scam and a Fraud
• Clinton Wants to Know “Am I Doing The Right Thing By Repaying My Debt?”
• How Do You Value Your Quality of Life? Debt Solutions to Fix The Future
• Opal Writes In “I’m Worried About Hurting My Credit If I Close Credit Card Accounts”
• How to Be Financially Successful When You Graduate
• We Are Looking Forward to Buying Our First Home But Our Credit Sucks. – Casey
• I Would Like to Clear Up My Credit A.S.A.P. – Ginger
• Secret Credit Bureaus You Don’t Know About, But They Know About You

Read the full article at GetOutOfDebt.org, click here: “How Do I Go About Making My Credit Score Better” – Antoine

Mark wrote in about his financial situation.

“Hi Steve,

I’ve used up all my savings now and don’t have any more money to send back to the UK to pay these debts. I’ve only been able to pay about £100 a month on £25,000 worth of debt. What should I do?”

Mark,

If you had lived in the United States, or anywhere outside the UK for less than three years, you could have still gone bankrupt in the UK using a foreign bankruptcy service.

But since you’ve been gone longer, bankruptcy back in the UK is no longer an option.

You have a few of options.

1. You could make payment arrangements the UK creditors but that makes it hard to pay off £ with $. But as you have learned, a repayment plan without an expectation that it will resolve the situation only drains you of cash and does not eliminate the debt.

2. You could speak with a US bankruptcy attorney and consider a US bankruptcy and include your UK debts. There are more cross border bankruptcies these days.
3. You could do nothing, stop paying the UK debt and then deal with any creditor that comes after you in the US.

As silly as it sounds, option 3 might be the best at this time, certainly making more payments isn’t going to help at all. But I would still suggest speaking with a US bankruptcy attorney to learn about how that solution may help you.

Any more payments to creditors, I’m afraid, is just going to be throwing more good money after bad.

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• Lourdes Writes In “What Should I Do to Get Out of Debt?”
• Five Inside Truths About Debt Management Plans (DMP) You Need to Know
• Rome Wasn’t Counterfeited In A Day
• Two Liberian Nationals Arrested In Black Money Scheme
• Chapter 3 – Take a Lap on the Gerbil Wheel of Debt
• Lauren is Searching For Ways to Get Out Of Debt And Make Her Bad Credit Go Away
• “How Do I Go About Making My Credit Score Better” – Antoine
• Kayte Has Drained Her Savings And Can’t Pay The Bills Anymore
• San Wants To Know “We Need Some Way To Pay Off Our Debts”
• Ben Wants To Know, “Will I Ever Get My Life Back After Bankruptcy?”

Read the full article at GetOutOfDebt.org, click here: Mark Writes In “I Need to Go Bankrupt in the UK”

Noname

“Dear Steve,

Hi, I am currently unemployed and broke living with my parents just barely getting by. I have about $3,000 in credit card debt which is 90 days since last payment. I am actively seeking a job now and called the credit card company and told them about the situation.

The credit card firm said that I should write them a letter on this. What should or shouldn’t I write them. Think I could ask them to freeze the interest and fees for six months so that i can clear the balance?

Your advice is welcome

Noname”

The Answer:

Dear Noname,

How about:

Dear Creditor,

I don’t have a penny to my name and I’m living in the basement of my parents house. I’d really appreciate it if you could just look the other way on the interest for the next six months or so and when I can start sending in a payment again, I will.

Sound cool to you?

Thanks.

Seriously, you can tell them exactly what your situation is and ask for the moon. But, when you send this letter, make sure that you have no expectations about any results.

The letter will document your current situation but your account will continue to flow through the collections queue for the next 90 days and which point your account will charge off and be sold to an outside bad debt buyer to pursue you.

Hopefully by that time you will have found a job and will be making money to begin to repay this debt. If you land a job soon before the debt charges off, call the original creditor and get on a payment plan with them to prevent the charge off.

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• Chapter 3 – Take a Lap on the Gerbil Wheel of Debt
• We Are Just Making It On Food Stamps, My Husband Had a Stroke, What Should We Do? – Kristina
• “How Do I Go About Making My Credit Score Better” – Antoine
• Unemployed, Broke, No Family, and in Debt. – Shelia
• Debt Fact – Most Pro Football, Baseball and Basketball Players Go Broke
• Mark Writes In “I Need to Go Bankrupt in the UK”
• Should I Sell My Toyota 4Runner and Buy a Beater to Pay Down My Debt? – Karen
• The Five Myths About Bankruptcy. Watch the Video.
• What to Do if Your Creditors And Bill Collectors Make You Really Angry
• New Concerns About 40% Credit Card Debt Reduction Proposal

Read the full article at GetOutOfDebt.org, click here: I’m Broke and Living With My Parents. My Credit Card Company Wants Me to Send Them a Letter. What Should I Say? – Noname

I’ve heard more people issue swear words and threats against creditors and debt collectors than you can imagine.

Having the pressure increase when you are in debt makes good people say and do silly and regrettable things. Many feel those normal emotions but feeling like you are going to explode or wanting to kill the debt collector or yourself is not going to help solve your money troubles.

A good debt collector will listen to your situation and work with you to find a solution. Listen to the interview with the debt collector below. If you don’t see a link to play the interview, visit the original post here: What to Do if Your Creditors And Bill Collectors Make You Really Angry

Feeling angry, murderous and suicidal are all understandable emotional extremes but those feeling of rage and anger are not going to makes your problems go away. The better and healthier solution is to ask yourself why the situation creates such aggression and rage in you. Most likely it is because you don’t want to be in the situation of having money problems or having to deal with them.

Lashing out or tearing the creditor a new one isn’t energy well spent towards finding a resolution. Keeping a clam head and trying to establish open communications works a lot better.

Now even if you have a prevailing calm and better attitude when the phone rings and it is a collector being nasty on the phone. Imagine what it is like from their side of the phone. All day long a computer is auto-dialing outbound calls for them and connecting them to people that are mean, rude and nasty back. The bill collector is hovered over by management to get so many ‘promises to pay’ each hour and not to spend a lot of time with people on the phone who are not promising to pay or the collector will be penalized. Want to see more about what is expected of a debt collector, watch this recruitment video.

When a debt collector or creditor is calling you for payment, they don’t know you, they are not making a personal judgement about you, you are just another name and number placed in front of them to call. You are nothing more than the widget the bill collector has to deal with at that moment.

They may pretend to make it personal because the collector knows that fear and shame can motivate people but that’s a ploy or trick, not reality.

If you feel your blood pressure rising, your jaw clenching and anger bubbling up, try this approach, kill them with kindness. Working hard to make a friend of the bill collector calling has advantages.

• You Are More Likely To Get Any Leniency Available – If you can make the bill collector your friend you have a better shot of having them go to bat for you when they can on their side. A bill collector is not going to plead the case of a screaming and raging lunatic. But remember, that just because you want to pay does not mean that special reductions can be met. Ultimately, the most agreeable arrangement with the creditor will be for you to pay your bill as you contractually agreed to.
• It Reduces Your Stress – If you can befriend the bill collector then when they call it is less fearful and threatening. This will help you from hiding or cowering in fear. If the phone gets to be too much to manage, then it is okay to escape and hide from the collector for a bit. You can do this easily if you use the two phone suggestion in my article, How to Hide From Debt Collection, the Debt Collector, and Creditors.

It is absolutely normal to feel regret and loss when your finances are in the toilet. But being angry and nasty at your creditors is not going to fix the reality of being behind on your bills, that’s the reason they are calling you.

So if at all possible, be gracious, kind and make a friend of the debt collector and creditors when they call. Not only can it lead to a better outcome, but it makes your life less stressful and more enjoyable as well.

Rather than kill the bill collector, just remember to kill them with kindness, respect and courtesy. And all of that being said, you never have to accept rude and abusive behavior from a bill collector. If they do treat you inappropriately, calmly tell them that you do not need to be spoken to like that, ask for a supervisor, or tell them you are going to hang-up if they can’t be nicer to you.

Other Related Articles to Read

• Shellie Had Cancer And Is Now Slowly Dying From Terminal Debt
• Chapter 2 – What Your Money is Trying to Tell You
• Chapter 3 – Take a Lap on the Gerbil Wheel of Debt
• 44 Lessons in Life for Debtors
• I am a Debt Collector and Now I’m in Big Trouble With Debt Myself. – Brent
• Is There Anything I Can Do to Get the Bill Collectors Off My Back for a Few Months? – Nadia
• Emily Wants to Know “I’m Pregnant And Got My Hours Cut. What Do I Do?”
• Deborah Wants to Write Letters to Creditors. But is That a Waste of Time?
• Robert Says “Please help. I never knew financial burdens can cause so much stress.”
• “How Do I Go About Making My Credit Score Better” – Antoine

Read the full article at GetOutOfDebt.org, click here: What to Do if Your Creditors And Bill Collectors Make You Really Angry

Last week I wrote an article Banks Agree to Wipe Out Up to 40 Percent of Credit Card Debt But Watch Out but more information has come to light since then.

While consumer advocates are happy about the possibility of getting banks to write off as much as 40% of the debt in order to help consumers avoid bankruptcy, this is a well intentioned plan that is still half baked.

Proponents of this initiative have not clearly thought out all the issues and appear to not be spending time learning from what has and has not worked from outside the United States fence. On first glance, an effort that would wipe out a large portion of debt seems like a blessing but from personal experience in helping people in the U.S. and the UK. These are the important areas we need to focus on.

• Creditor Voting – I have not read or heard any discussion about the 40% plan becoming binding on all unsecured creditors if the majority of creditors, by debt, agree to the plan. Unless all creditors are bound to the plan all it takes is one creditor to not participate and the entire solution blows up. The reality of getting all to agree is unreasonable so a 51% acceptance of the plan should be sufficient.
• Fast Track Individual Voluntary Arrangement (FTIVA) – In April, 2009 a new process will come into effect in the UK. The FTIVA is designed to allow 90% of insolvent debtors who would normally seek bankruptcy protection, to enter into a payment plan upon a 51% acceptance by creditors. The extensive research and framework of this plan is something that we should closely study and consider emulating before the U.S. goes off and learns the mistake lessons like the UK already has from the more formal IVA already in place since 1986. UK Fast Track IVA Review Document – PDF
• Make Life Allowances – Not only does this repayment plan need to be binding on all creditors upon a majority vote but it needs to have allowances and processes built-in to handle an unexpected financial hardship for a consumer enrolled in the plan. Already, consumers are seeking bankruptcy protection secondary to unexpected life events which create hardship. If a consumer is enrolled in the 40% plan and three years into the plan they have an unexpected financial emergency, we don’t want the plan failed and creditors to go back after the entire debt and all the fees and interest they can heap on. We need to create some fail safe mechanism that does not leave, the consumer that has made their best effort, stranded after so much effort. Otherwise, why not just go bankrupt to begin with and avoid the possibility of wasting three or four years of repayment only to fail due to an accident, illness, downsizing, etc.
• Provide Incentives For Hard Work and Extra Effort – A lesson to be learned from the UK system would be that we need to provide consumers with an incentive to end their 40% plan early if they work hard, increase their income and can pay the plan off early. Accelerated repayments benefit the creditors and the consumer since it gives them motivation to improve their financial standing during the time in the plan. In the UK it is far too common for a consumer to get a raise or increase income only to have it taken from them as a windfall and poured into the plan. We need to fix the total amount due under the plan at the start so that the consumer clearly knows the total debt to be repaid and let them be hungry to pay it off early through grit and determination.

United States consumers have been long abandoned and left without new and more progressive ways to repay their debt outside of bankruptcy. This is our opportunity to remedy this situation and give good people with bad debt a way to effectively repay their debt with more protections than a credit counseling plan can give and without the big gun of bankruptcy.

Other Related Articles to Read

• Banks Agree to Wipe Out Up to 40 Percent of Credit Card Debt But Watch Out.
• April Wants To Know “As A Single Mom, How Do I Get Out Of Debt?”
• The Perfect Debt Assistance Program
• I Am Now a Pensioner. Should I Close Down My IVA – Individual Voluntary Arrangement? – Carl
• We Eliminated Our UK Debt With an IVA But a Loan is Reported as Defaulted. – Katie
• IVA or Bankruptcy for My Hong Kong Debt? – Anon
• Debt Management Industry Facing Widespread Problems in UK
• How to Shop for a Good Debt Management Program
• I Really Screwed Up And Need Some Direction. – Chris
• Lauren is Searching For Ways to Get Out Of Debt And Make Her Bad Credit Go Away

Read the full article at GetOutOfDebt.org, click here: New Concerns About 40% Credit Card Debt Reduction Proposal

I can dream, can’t I? If I could get a wish for debtors it would be to wave a wand and implement this perfect debt assistance or debt relief program.

Here is what the program would look like.

A Sliding Scale Nominal Charge – Consumers would have to pay a sliding scale setup fee. It is too expensive to start a lot of work on behalf of clients that never follow through. So a new client would pay a sliding scale setup fee upfront to cover the initial cost of getting their plan established and show they are committed to moving ahead.

Copies of Bills – Debtors would provide copies of their statements quickly. Ideally potential clients needing help would be getting their mail via something like Earth Class Mail so they could instantly forward copies of their bills to the debt adviser. That would be wonderful! The delay in making copies and forwarding them only delays the process and creates more busy work.

Allow the Debt Adviser to Pull a Consolidated Credit Report – Allow the debt management company to pull a consolidated credit report at a reduced charge to make sure they know about all debts.

A Real Spending Plan – The debt management company would review the client’s financial situation and put together a suggested debt repayment plan that is affordable, reasonable and sustainable through total repayment. None of this cut out everything fun stuff, leave some room for a movie or occasional night out. Also, be sure to include some money going into a savings account every month for emergencies and unexpected expenses. The spending plan will need to be able to be adjusted and payments possibly reduced for living expense increases like adjustable mortgage payments, increasing health insurance, etc.

Fair Payments to Creditors – Payments to unsecured creditors included in the repayment plan would be based on the percentage of debt that the creditor is responsible for. For example, if the client owes Sears 13% of their total debt then Sears would get 13% of debt repayment dollars available, as determined by the debt advisor.

Credit Counselors Actually Dictate – Unlike the BS lie that floats around now that credit counseling groups negotiate a debt management plan, which they don’t, in the perfect plan, they would tell the creditor what they will get, not what they want. The debt adviser would contact the unsecured creditors and notify them what the amount they will receive under this debt management plan.

The Debt Management Group Has Some Real Authority – In the perfect plan the credit counselor would be required to certify that the repayment plan proposed is the consumers best effort. Creditors would be required to accept the reduced payment plan as put forward by the debt counselor.

Creditors Would Eliminate All Interest and Fees – During the repayment period, all interest and fees would be waived as long as the client is making their payments as agreed. An allowance should be made for an unusual situation that leads to a a payment missed, but a creditor would not be able to go back and retro charge a client interest for the period which they were making payments.

Creditors Acknowledge the Plan and are Bound to It – Creditors would be required to confirm the balances due when the client enters the plan and then the creditor will be bound to that balance even if they sell the account to another creditor. This will allow the client and debt management company to calculate the exact date the consumer will be out of debt if they make the payments as agreed. This will give everyone a date to mark down and look forward to.

All Collection Activity Ceases – Once the client makes their first repayment under the plan, and continues regular payments, all collection activity will cease by the creditors.

Creditors Can Pursue Clients Under Certain Situations – If it is determined that the client lied about their income or expenses or if they stop making monthly payments, the creditors can resume all collection activity.

Client Can Make Payments Or Hire A Payment Processor – Once the plan is negotiated and put in place by the debt management company then the client can elect to either make the payments themselves to the creditors or to hire a payment processor to whom they send one payment and the payment processor distributes it for the client. This is service that some consumers may desire.

Credit Counselors Can Be For-Profit – It is time to end the sham that only non-profit groups provide better service to consumers. There needs to be a free market to allow companies to compete in order to drive up the level of service and capabilities of leading companies. There is nothing in a debt management plan that requires the need for a charity. Allow for-profit companies to enter this market and attract bright, smart and talented people to create services for consumers.

Require Credit Counseling Companies to be Bonded and Licensed – If a credit counseling group is going to be handling consumer money then they need to either have an adequate employee loss or theft policy, be reasonably bonded and be licensed by the federal government.

Make Laws Governing Debt Management Companies Federal – Make debt management regulations federal instead of state based. There are just too many states to deal with. Consumers can be protected with a federal envelope rather than 50 different rules and regulations.

Paid Creditor Intervention – If a consumer is having a dispute or difficulty during their repayment plan they could hire a debt advisor to intervene on their behalf to try to remedy the situation. The debt adviser is a third-party with professional experience in handling these situations.

Allow The Debt Company to Charge For Credit Report Assistance – Allow the credit counseling group to be hired by the consumer to help correct inaccurate or false information that appears on the consumer credit report. Some people never do this themselves. This does not cover the removal of any accurate but negative information.

No Lingering Tax Liability- Unlike now, where any forgiven debt is taxed by the IRS as if it was earned as income, except for debt discharged in bankruptcy, the IRS needs to not bill consumers for the that amount owed that creditors may write off under this plan. Getting a tax bill for debt you already can’t pay is a strong disincentive for consumers to even bother with repayment.

Fixed Repayment Period – Consumers would not have to repay more than four years under this plan. The often suggested five year date is just a bit too long to provide substantial incentive for debtors to sacrifice years of their lives and gamble on the possibility of successfully completing the program. The shorter the period, the more likely that a consumer will embark on the journey and successfully complete it.

Other Related Articles to Read

• How to Shop for a Good Debt Management Program
• Eva Has Heard Negative Things About CCCS
• New Concerns About 40% Credit Card Debt Reduction Proposal
• Five Inside Truths About Debt Management Plans (DMP) You Need to Know
• Less Than Full Balance Plans and the Problems They Create for Credit Counselors
• All About Cambridge Credit Counseling Corp.
• How Can We Reduce Our Interest Rates So We Can Pay Our Own Way? – Joan
• I Would Like to Consolidate My Debt, However I’m Having a Difficult Time Finding Someone Who Will – Laurie
• I Really Screwed Up And Need Some Direction. – Chris
• Deepu’s Wife is Unemployed And is Looking for a Debt Consolidation Loan

Read the full article at GetOutOfDebt.org, click here: The Perfect Debt Assistance Program

Diane wrote to me at the GetOutOfDebt.org site and asked for help with her debt situation. You can write me too if you need help.

Here is what Diane said:

“Dear Steve,

I have signed up with New Beginnings to get out of debt. I have paid them for two months so far and have stopped paying on a loan and credit cards. The phone calls are overwhelming and their advice is not to answer. The loan person at a finance company told me they do not accept lump sum offers and if I do not pay may go to court.

Can this happen,what should I do?”

Dear Diane,

I am assuming that the New Beginnings you are talking about is the debt settlement company. I’m a bit concerned that a staff member there told you not to answer the phone. I took a look at the New Beginnings web site and found this question and answer on their FAQ page.

Q. Are my creditors going to continue to call me?

A. We will determine who and when to contact to give any information and negotiate your accounts. It might be that the individual creditor representative who is calling you is not in the right department to settle any accounts. ALWAYS answer the phone and document the callers’ name, company they are calling from, the last four digits of the account in question, and their call back number on the creditor call log.

Debt settlement companies can provide a valuable service but the biggest problem I’ve seen with then is that consumers don’t seem to fully understand the realities of debt settlement. Debt settlement seems like such a wonderful tool, the prospect of eliminating 60% or more of your debt seems magical to most and once they hear that little fact, the brain stops reading or listening.

The loan company told you that they may take you to court, and they can. If you are paying the debt settlement company instead of the creditor and you are not in compliance with the mutual terms of the loan agreement then the creditor could choose to enforce their rights through the court system. Will they? They could be bluffing, pushing your buttons or just trying to scare you. There is no way to really tell.

There are a couple of other points to know about also when settling debt. As strange as this sounds, the amount of debt forgiven that you do not pay is considered as income by the IRS and you will have to pay income tax on that just as if you earned it.

For example: You owe $10,000 and you settle for $4,000. You will have to pay income tax on the $6,000 of forgiven debt.

The second important point is that a settled debt will appear negatively on your credit report. The portion of your debt forgiven will appear as an unpaid and uncollected debt.

Now, the best use of debt settlement is when you have a lump sum of money, cash in hand, to settle your debts. In this case a plea can be made to accept that lump sum as a full and final payment. Confirmation can be obtained in writing of the deal and the funds immediately transferred to the creditor. Bing, bang, boom, it’s done and over with.

When you are making monthly payments to a debt settlement company your account will continue to flow through the normal collection process. Just because you are working with the debt settlement company does not change your status as a now delinquent debtor.

The debt settlement company wants you to send your payments to them instead of your creditors because they want your accounts to get significantly past due. It is in your best interest for them to go past due if you want to try to settle them. Once it is really past due then the best deals can be had.

The biggest debt settlement client problems occur in the early days. Some are able to take the collection calls, threats, nasty attitude from collectors or face being sued in hopes of settling their debts. Others can’t and pick an alternate path, like bankruptcy.

It might just be that debt settlement is not something that you are emotionally comfortable with and in that case the possibility that you are going to continue to tolerate the types of calls you are getting now, is unlikely.

I would suggest that you look into a debt management plan and speak to a bankruptcy attorney to find out more about what your other options are. The only option that has any control or legal authority over the creditor is bankruptcy.

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• Debt Settlement: Top Ten Most Misunderstood Facts
• Chapter 3 – Take a Lap on the Gerbil Wheel of Debt
• Trapped in a Debt Settlement Contract. What to Do? – Dean
• Lynn is Working With a Debt Settlement Company But Being Sued By Her Creditor
• Should We Use Freedom Debt Relief or an Attorney to Help Us With Debt Settlement? – Debbie
• Rebecca And Her Husband Are Struggling to Keep The Business Going
• Trish Says “Credit Counselor Is Going Out of Business And I’m Late On Payments”
• “How Do I Go About Making My Credit Score Better” – Antoine
• Teresa Writes In And Asks “What Should I Do Next?”
• Mark Writes In “I Need to Go Bankrupt in the UK”

Read the full article at GetOutOfDebt.org, click here: Diane Writes In “I Want to Settle My Debt. My Creditor Wants to Take Me to Court.”

Giner wrote in through the GetOutOfDebt.org site and asked for help.

“I started a new business, had a few small credit card balances before, but had to use them, plus acquiring a few more, and with the balance trasfer deals, I now have 8 cards with a total debt of $50,000+. I manage to stay a float, my business has grown, but with the terrible interest rates, I pay out more in interest than principal even always paying more than the minimum due. I can’t get ahead.

I’ve asked card companies to reduce rates, even asked for managers, but can’t get them to reduce interest; what can I do?“

Ginger,

I’ve certainly seen many business advisers that suggest turning towards credit cards to fund a small business. I’ve just never been that brave to do it. I’ve always been afraid of the resulting debt.

The good news here is that your business is growing. The reality is that it is at a huge cost, the interest. Funding any kind of start-up on cards can be massively expensive and what you see now is simply the result.

If your credit is good you can look through the balance transfer deals here online and find one that works for you. You can then transfer your balances but you must keep your payments at the same or more than you are paying now.

When you do a low interest or 0% balance transfer the creditor will lower your minimum payment during that time so you are not actually paying off your debt. What they want to happen is for you to get to the end of the intro rate period and then jack your rates way up.

Alternatively, if you have some equity in your home, and good credit, you could look at a debt consolidation loan or refinancing some of your equity to pay off the cards.

Other options like debt settlement and debt management plans should be avoided right now in your situation. Let’s keep your good credit report and credit score good.

I’m not surprised that the lenders are not willing to make deals. While you are paying the minimums or just above the minimums you are the type of customer they want, a profit machine. You’ll pay and pay and pay but not make any progress towards actually reducing your debt.

I guess the last option is to continue to tread water right now and let your business grow more and hopefully fund your debt reduction in the future.

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• Expect Tidal Wave Of Limit Reductions and Credit Card Closures to Hit Before Christmas
• Teresa Writes In And Asks “What Should I Do Next?”
• Soon, Where You Shop Will Control Your Credit
• Consumers Feel the Next Crisis: It’s Credit Cards
• Robert Wrote “I Do Not Know Where To Start Other Than I Am in Debt”
• Tony Writes In “I Have Too Much Debt On My Credit Cards”
• Couple Faces Serious Jail Time For Their $25 Million Nationwide Telemarketing Fraud Scam
• I Was Building a New House But the Bank Won’t Give Us What it Appraised For So I Put the Rest on My Credit Cards. – John
• SteveSavers – Group Discounts to Save Big Bucks on Debt and Credit Help
• Teresa Writes In “I Have Too Many Credit Cards”

Read the full article at GetOutOfDebt.org, click here: Ginger Asks “I Started My Business On Credit Cards But It’s Hard to Make Payments”

People are often so confused or uninformed about debt management plans in the US that I wanted to share some truths with you. Here are the five biggest misconceptions people have about debt management plans, in no particular order.

1. Debt Management Plans Are Not Designed for You to Get Out of Debt

   Since the DMP terms are really dictated by the creditors a debt management plan is not really designed to get you out of debt.

   A true get out of debt plan would be created using your circumstances as the starting point and then crafting a plan to allow you to get out of debt from your starting point.

   The DMPs of today, with creditor dictated terms, doesn’t work like that. It tries to get you out of debt using what the creditor wants as the starting point.

2. Debt Management Plans From a Not-Profit Credit Counseling Group Are Not Better

   A debt management plan from a nonprofit, non-profit or not-for-profit charity is not any better or worse than from a commercial or for-profit company. Being a nonprofit credit counseling group does not change the basic security measures necessary for a safe debt management plan.

   A nonprofit charity like a consumer credit counseling office is not much different than a commercial company. Except for the following major issues.

   The nonprofit credit counseling company gets paid for collecting money from you on behalf of your creditors and does not want to “rock that boat” and fight back against creditors if that will reduce their favor or funding.

   The nonprofit credit counseling company “pretends” for the most part to be a charity when in fact they generate the majority of their income as debt collectors.

3. Most People Don’t Get Out of Debt Using a Debt Management Plan

   The majority of people that participate in debt management plans do not make it to completion and thus do not get out of debt using a debt management plan. This is not really a fault of the DMP provider but that a debt management plan takes years to complete and the debtors circumstances can change along the way.

   The majority of Chapter 13 bankruptcy plans fail to complete as well for the exact same reasons. The failure of debt management programs is due to life and time, primarily.

4. Bankruptcy is Often Better Than a Debt Management Plan

   Strictly from a time point of view, bankruptcy can be a better option. When you file bankruptcy the credit report recovery clock starts ticking immediately. In a debt management plan the history of you plan and payments can remain for longer since it can be reported from the date of your last payment.

   Bankruptcy also allows many to get a fresh start and a second chance to start over. Recovering from a bankruptcy is hard but not impossible and the breathing room people get after bankruptcy is often just what they need to move forward, faster.

5. Paying For Help to Get Out of Debt is Good

   The charitable debt management industry fails to inform you that they are paid by the creditors to collect money from you. There is no way around the fact that this can cloud their assistance because they are trying to please their pay masters and the clients at the same time. Which do you think gets the higher priority?

   When you pay for debt help the company you hire is motivated to work for you. You are the client and there is no confusion about who the allegiance is owed to.

Other Related Articles to Read

• Mark Writes In “I Need to Go Bankrupt in the UK”
• The Perfect Debt Assistance Program
• Chapter 3 – Take a Lap on the Gerbil Wheel of Debt
• I Really Screwed Up And Need Some Direction. – Chris
• “How Do I Go About Making My Credit Score Better” – Antoine
• Are Debt Management Programs For Real? – Kim
• Can I Keep One Credit Card Open for Business in a Debt Management Plan? – Dave
• Federal Trade Commission Should Allow For-Profit Credit Counseling and Debt Settlement Firms to Assist All Consumers
• What to Do if Your Creditors And Bill Collectors Make You Really Angry
• New Concerns About 40% Credit Card Debt Reduction Proposal

Read the full article at GetOutOfDebt.org, click here: Five Inside Truths About Debt Management Plans (DMP) You Need to Know

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