Much fanfare is being made about the new Debt Resolution Plan developed by Robert Manning and his Responsible Debt Relief Institute.
The Debt Resolution Plan is being promoted saying it “provides consumers and financial institutions an independent, transparent, fair and quantifiable way to assess consumers’ ability to repay their debts without the stress of unrealistic collection demands or the legal expense of filing for bankruptcy. Banks need to embrace a common sense approach of working with their customers to help them repay their debts to the best of their ability.” – Source
While I worked for many years to create a partial repayment plan there are certain factors that are still not in the Debt Resolution Plans favor. First, the Office of the Comptroller of the Currency must make allowances for banks to carry non-performing debt on their books past 180 days, banks must be willing to hopefully accept partial payments rather than sell the bad debt now for cash in hand, creditors and collectors must not hassle debtors during the repayment period, and debt unable to be paid must not result in a tax liability to debtors.
A non-profit credit counseling group, with giddy glee is excited about offering this approach saying, “Currently, we can assist less than 10% of consumers seeking our help with their debt problems because we only offer full-payment plans. With the DRP™ program, we can now help over 70% of these consumers as they struggle with unemployment, medical bills, and other financial difficulties.” – Source
I did enjoy the admission that the credit counseling group admitted they can help less than 10% of the people that come to them but before everyone gets all high with excitement over this plan the biggest hurdle that must be crossed is for all creditors to agree to accept reduced payments.
Unfortunately, creditors are jealous, greedy, children. If one feels that another is getting more money and a better deal, they will pitch a fit. I spent five years working on a similar type of program and never could get past trying to get creditors to agree to a fair and pro-ratta repayment program. It was like trying to heard cats, impossible!
Right now, the Debt Resolution Plan is neither binding nor provides consumers with any legal protection from creditors from lawsuits, collection activity or changing terms.
Unless binding legal protections are made law, bankruptcy would still be a more logical and preferable way out of debt for a consumer to get the benefits of legal protection from debt collectors, avoid tax liability and get a fast and fresh start.
Not yet explored is how the partial debt will be reported to the credit bureaus but then again there is still a lot to be worked out here.