I am very in debt, a little under $40K. I was out of work last year for over 6 months.
I purchased my town home in 10/08 for 163K, at 6.9%. I refinanced May09 at 5% but I had to roll in the finance charges (getting back my escrow to help living expenses) and my new mortgage is $173K with no equity. I am working now and able to live, but I’ll never get out from under this cc debt.
I have right at $10K in cash in the bank and I do not have a car pymnt. I’ve heard about Robert Manning’s offering that would help me work with the creditors to forgive some of this debt. Is this a reliable thing? Would it kill my credit score, which at the time of my refinance in the upper 700’s. I cannot pay much more than the minimum balances.
I am at this moment trying to re-work my budget so I have more to pay on the cc pymnts. I am single with no other income. Besides living off of my credit while I was unemployed and old credit debt I have not charged anything since Oct and not much before that, paying cash for everything, like I said I can live nicely without charging anything I just do not know how to get out from under this huge amount of debt.
Is there any financial stability in my future? and is Robert Manning’s http://www.creditcardnation.com/ and Hope Financial USA legit and helpful?
Dr. Robert Manning has been a long outspoken academic critic of the credit card and banking world. In the past few years he has launched a program, which I believe his non-profit group has applied for a patent on his process and licenses to groups to offer debt help. He is also the author of a very popular book, Credit Card Nation: The Consequences of America’s Addiction to Credit.
WARNING: Coffee may be required to watch video.
Manning’s Responsible Debt Relief Institute, for a $45 assessment fee, will perform an assessment of your current financial situation and come up with a solution recommendation. Solutions “include a traditional Debt Management Plan (DMP) with a Consumer Credit Counseling provider, a Debt Resolution Program (DRP) with a Consumer Credit Counseling Provider, or bankruptcy as the least preferred option.” – Source.
Manning has recognized the problem with current debt relief options.
Today, the near-bankrupt, which include dual-income households, are facing a credit crunch that is forcing them to consider various debt management, less-than-full-balance payoff, and bankruptcy (Chapter 7 or 13) options. The problem is exacerbated by resetting ARMs, rising loan to value (LTVs) of their mortgages (precluding new home equity loans), escalating finance rates on credit cards, the rising cost of living, and a sharply declining housing market for those seeking to pay off their consumer debts following the sale of their homes. Significantly, the overwhelming majority of these families intend to repay their debts to the best of their abilities while struggling with the unexpected changes in the U.S. economy and consumer lending practices.
Over the next two years many households will increase their credit card balances in order to service their home mortgages. Others will enroll in debt management programs and eventually drop out due to inevitable financial exigencies. Some households that do not qualify for an accredited Consumer Credit Counseling Service (CCCS) program will enroll in nefarious debt settlement programs, while the rest will simply give up by filing for consumer bankruptcy in a last-gasp effort to save their homes or to seek protection from the stress of debt collection actions. Others will default on their loans and seek informal financial relief outside a negotiated partial payment or debt liquidation program; many cannot even afford the requisite fees to file for Chapter 7 bankruptcy. Hence, consumer demand is intensifying for a programmatic solution to the “all or nothing” debt repayment binary of CCCS programs (full payment) and Chapter 7 bankruptcy (full debt discharge). – Source
So the algorithm developed and licensed by Manning and his institute is designed to find the debt solution that comes out best in its grading filter. The program also hopes to put together a solution that allows consumers to pay less than their full debts, much like a bankruptcy. Consumers that fall into this bucket will be passed to HOPE Financial USA.
The hope is that the Responsible Choice plan will give people and option between bankruptcy and credit counseling.
All of this sounds great but there is one major issue, none of this is law or made binding on any creditor that might participate with the RDR approach or HOPE Financial USA. In my own experience in developing a similar bankruptcy avoidance partial debt repayment plan my team had a tremendously difficult task of getting full acceptance by creditors even when supplying more supporting data than required in a bankruptcy. The problem isn’t that the data was not there, the background story well determined and a prognosis for success, clear. The problem with acceptance was that the creditor policies and procedures are an undulating mess and all it took was one creditor not to agree or change their mind latter and the whole plan failed.
Creditors historically have not like fair and reasonable pro rata repayment plans. In my opinion some creditors felt they could not participate and hope to collect a higher percentage while other, “sucker”, creditors went with the plan. So time and a binding agreement by all creditors will tell if this approach eventually becomes a success. I wish Dr. Manning well on his attempt but my bet is that it will never achieve enough acceptance from creditors to help consumers avoid bankruptcy.
Other similar approaches around the world, like the Individual Voluntary Arrangement (IVA) in the UK are for a period of five years. Many U.S. based credit card companies have experience with the IVA approach and even though it clearly demonstrates a higher rate of return when creditors play nice together, the reality is they don’t. Creditors in the UK have fought the IVA approach hard and worked to gut the program.
The Other Issue
If the Manning and RDR approach is designed to allow people to repay their debt over three years, which I think will probably go to five if it has a chance to get significant traction, then there is actually little reason for a debtor to not seriously consider bankruptcy first. About 70% of consumer bankruptcies are Chapter 7 bankruptcy where the debtor receives a full discharge of their unsecured consumer debt in a matter of months. Sure the credit report will take a hit but in the time it would have taken the consumer to emerge from the RDR approach they would have been able to rebuild their credit and have saved money in the bank. Additionally, a consumer going through bankruptcy would have received protection from collections activity and no risk of lawsuits from creditors.
I’m going to give you the same advice I would give a dear friend, click here to find a local bankruptcy attorney and go talk to them. A Chapter 13 bankruptcy would allow you to keep your home and create a fair, reasonable and binding debt repayment plan that your creditors, by law, must accept. But since you have no equity in your home you may be able to go for a Chapter 7 bankruptcy, keep your home and get a fresh start right now. Before you do anything, go talk to a local bankruptcy attorney and educate yourself about what bankruptcy would mean for you.
This seems to be the most prudent approach since it will get you back into a position of being able to rebuild your credit and rebuild your emergency fund faster which will give you better life protection.
Let someone else be the guinea pig for the HOPE Financial USA and Responsible Debt Relief approach. Go for a guaranteed win with bankruptcy. You will have a great credit score again, even with bankruptcy.
P.S. Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.