I suppose that it is the result of years of helping people in financial trouble and the ability to have seen way behind the curtain of how things work, but I’ve got to be honest, I’m not very proud of America when it comes to providing real solutions to help people deal with bad debt situations.
Banks and lobbyists have controlled legislators for decades and manipulated Congress and state governments to give them what they want, more power. The bankruptcy reform act of 2005 was a huge gift for the banks and credit card companies and did nothing to help consumers.
No matter what you might think, most people in debt want to repay what they can afford to, but can’t, not because they are losers, but simply because it is hard to get banks to accept fair and reasonable payments. It’s impossible to get creditors to accept payments the debtor can honestly afford instead of what the bank demands. As ironic as it sounds, the elephant in the room here is that in whole, banks are not willing to accept fair and sustainable repayments from consumers, which in turn drives people to bankruptcy where they eliminate all or most of their debt.
The solutions that come to mind in America for people with money troubles, are for the most part, simply playing the system to the creditors advantage and neither provide and power to consumers nor fair representation.
Let’s take credit counseling for example. While at one time in my life I ran a large credit counseling non-profit company, the industry has morphed into more of one of a wolf in sheep clothing. Credit counseling today works for the creditors and does not represent consumers. Credit counselors are paid for the money they collect from consumers, like a debt collector, exactly like a debt collector, because they are debt collectors.
Credit counselors don’t negotiate with creditors and they don’t have any power to fight for the consumer or create a repayment plan that is based on what the debtor can really afford. Repayment plans are calculated based on what the creditor wants. Even the big names in the credit counseling business, whose four letter abbreviation I will not use here, are becoming or have already become more like a collection company than consumer advocates. Actually, I’m not sure they ever were.
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Credit counseling offers debtors no protection when they are making debt repayments. They can’t hold off collections, legal action, or prevent creditors from changing the repayment terms in midstream. They don’t negotiate with creditors because they have no legal power to negotiate and they do little to fight against bad creditor actions proactively because they don’t want to piss off the hands that feed them.
Then there is the debt settlement industry. Again, there is no legal authority that the debt settlement companies have. They can’t force a creditor to accept a settlement and they can’t stop any legal action that a creditor might take against someone in debt. Today the debt settlement industry is a train wreck waiting to happen. Entities of dubious character have flooded the market and attorney general’s around the country are preparing to unleash an ass beating on them for not offering real help and charging up-front fees for services they never deliver. Let the beatings begin.
So what’s left, nothing but bankruptcy. Bankruptcy is the only legally binding debt solution that gives consumers the help of the law to deal with their debts. It forces creditors to accept a repayment plan that the consumers, on paper, should pay, based on their actual income and expenses. It stops collection activity and gives people a real opportunity to emerge from under an otherwise impossible situation. And yet, bankruptcy sucks. It is not an action that people are proud of and there is still a big stigma attached to it, despite of what you might here. When was the last time you were invited to a bankruptcy party? Never!
What we desperately lack in America is a solution that allows people to put forth their best repayment offers that are reasonable, sustainable and affordable to prevent bankruptcy. We lack a system that allows for debtors to save some money at the same time they are trying to dig themselves out and we lack a process that forces all creditors to accept a repayment plan that gives people a real chance to repay what they can afford to. We also lack a system that rewards consumers for working hard to repay their debt. All of this is insane and is designed to only serve one entity, the banks and credit card companies.
I strongly believe that there is a need for such a system in America and there is ample evidence to show how such solutions have worked in other parts of the world. I’ve had experience with them. We could create a carrot and stick solution that rewarded consumers for repaying their debt instead of maintaining our current system of beatings and punishments and legal extractions of money from consumers that instead drives them to completely discharge their debt.
Creditors and lawmakers, let’s stop punishing debtors in trouble with ineffective options and punitive regulations. Instead, let’s start creating a solution that let’s good people actually repay their bad debt within a system and structure that is fair, reasonable and sustainable. I’ll help.
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