January 24, 2006
Do-It-Yourself Debt Settlement Options
The great thing about a do-it-yourself debt settlement option is that you don't have to qualify and you can do it no matter how bad (or good) your credit is.
This debt settlement option is the most versatile of all the options. There are no qualifications to meet...there are no states that you cannot do this in...
There is none of that.
What a performance-fee or front-fee based debt settlement option can't offer – do-it-yourself debt settlement can.
Some the of the greatest benefits to doing it yourself are...
But it also has some major drawbacks as well...
Fortunately, it doesn't take long to learn the ins and outs of debt settlement to get yourself the best settlements.
Of course...there are some companies out there that cater to coaching you on a one-on-one basis to teach you everything that you need. By being coached you can and will learn how settle with your creditors.
Then you could take this knowledge and start teaching your friends and family and maybe make this into a business...
I did this with Jennifer, and she did awesomely...
She could not afford to do any settlements with a company as she just did not have the funds to set aside each month to use a debt settlement company. Her only debt settlement option was to do it herself...and she had two of the hardest creditors ever!
She was desperate. Later she told me that this was the lowest time in her life. However, I coached her through the settlement process and keep her motivated as she came through it with flying colors.
Within five months she...
And because she did the debt settlement and improved her credit score, she was approved by her state's government to get training to get a new career.
You may be thinking that her scene must not have been that tough, but factually she had one of the toughest situations that you could possibly have.
You see she suffered from a mental disability and could no longer work. She was only getting about $500 a month for living expenses and did not have any assets or reserves. Yet she settled over $30,000 in debt...to two of the toughest creditors around...and did it in less than six months...and she improved her credit score as well.
That is the power of doing it yourself.
I would only recommend doing it yourself under these conditions:
Of course...you would never use a debt settlement option just because you were mad and wanted to get back at your creditors. Debt settlement should only be used when all other options have failed.
Dealing with the creditors
You will have to deal with the creditors yourself when doing this debt settlement option.
Creditors can get quite nasty when they are trying to collect what they believe is their money. Just go on the internet and you'll see so many horror stories of debt collectors just harassing people “it'll make yer head spin.”
They can and WILL get very pushy. Especially if you have fallen behind in payments.
The original creditors (OC) can be decent to work with, but collection agencies, as a generality, are the bottom feeders.
This is a major reason the performance-fee based debt settlement options work so hard to ensure that your accounts do not charge-off.
So if you go this route of do-it-yourself debt settlement then be prepared to deal with the creditors.
Lack of knowledge to get the best settlements.
Not having the ins and outs of debt settlement industry is a big barrier for you.
Most of the debt settlement companies out there have been doing settlements for years. They know who to speak with, know what questions to ask and what to say, they know when to say some things and not say them, they know what forms to fill out, and...
They know just how to keep the debt collector off your back for long enough time for you to do the plan.
By doing it yourself you will not have these advantages.
Some banks, like MBNA (but only if they know you are not working with a company), will hand you sweet deals without you even lifting a finger. Others, like Citibank and Chase, you'll have to work for.
Of course, with persistence and insistence, you should be able to work out deals of 50 cents on the dollar or less.
Lack of knowledge of the laws.
This is biggest headache...in my humble opinion...you'll run into with trying to do settlements yourself.
After charge-off the OC will assign (send) your account to a collection agency (CA).
The CA is only by law allowed to collect the debt for the OC. You do not owe the CA any money. Of course...they'll harass you to make you think you do...but don't fall for it.
Exception: After 2 or 3 years an OC may sell your account to a collection agency. The CA s are often refer to as Junk Debt Buyers (JDB). They do own your account and can collect and keep all the money you pay them.
When a CA collects any money from you for a debt, they pass on a portion of that money to the OC and keep a portion as their commission.
An OC may have your account sent to various CA s, especially if they are not making any head way in collecting.
Sometimes a CA is an attorney firm. They will collect just like any other CA but with one major exception...after a certain time...they can sue for the debt. IF you have Citibank, MBNA, Discover, Amex (American Express) or any retail or gas cards, then you stand about a 75% chance of getting sued...in my estimation...especially if the amount due is $2000-$2500 or more.
No CA may sue you for monies owed unless they have written permission from the OC beforehand.
Key laws that you should know are...
The Fair Debt Collection Practices Act (FDCPA) are the rules that mandate the CA s on collecting debts from you. You need to know these rules COLD.
I bet you that if a CA is trying to collect on a debt from you that they are violating one of these rules.
The Fair Credit Report Act (FCRA)are the rules that cover how the debts are to be reported by the OC's and CA's. Violation of the FCRA is the favorite tactic used by the CA's for your submission into paying up.
Finally, knowing the state and local laws governing CA's and OC's is a must! In some states, it is illegal for CA's to collect from you if they are not licensed in that state. You can find out about these laws with your state's Attorney General.
To learn about the FDCPA and FCRA then go to www.ftc.gov.
In summary.
I did not try to go into exactly how to do a do-it-yourself debt settlement, but only to give you a basic, general understanding of all that is involved.
No matter whether you use a performance-fee based, a front-fee based or a do-it-yourself debt settlement option you need to know what you are getting into. I hope that this helps you better understand this option so that you can make the best decision for your situation.
This debt settlement option is the most versatile of all the options. There are no qualifications to meet...there are no states that you cannot do this in...
There is none of that.
What a performance-fee or front-fee based debt settlement option can't offer – do-it-yourself debt settlement can.
Some the of the greatest benefits to doing it yourself are...
- Save all the money that you'd otherwise spend in fees.
- You control all of your money.
- You can protect and improve your credit.
- Take as long as you want or need to get out of debt.
But it also has some major drawbacks as well...
- You have to deal with the creditors personally.
- Lack of knowledge to get the best settlements.
- Lack of knowledge in the laws.
Fortunately, it doesn't take long to learn the ins and outs of debt settlement to get yourself the best settlements.
Of course...there are some companies out there that cater to coaching you on a one-on-one basis to teach you everything that you need. By being coached you can and will learn how settle with your creditors.
Then you could take this knowledge and start teaching your friends and family and maybe make this into a business...
I did this with Jennifer, and she did awesomely...
She could not afford to do any settlements with a company as she just did not have the funds to set aside each month to use a debt settlement company. Her only debt settlement option was to do it herself...and she had two of the hardest creditors ever!
She was desperate. Later she told me that this was the lowest time in her life. However, I coached her through the settlement process and keep her motivated as she came through it with flying colors.
Within five months she...
- handled both creditors.
- Improved her credit to over 700
- had one of best Christmas's ever.
- She is now teaching what she learned from me to her family and friends to help them with their debt problems.
And because she did the debt settlement and improved her credit score, she was approved by her state's government to get training to get a new career.
You may be thinking that her scene must not have been that tough, but factually she had one of the toughest situations that you could possibly have.
You see she suffered from a mental disability and could no longer work. She was only getting about $500 a month for living expenses and did not have any assets or reserves. Yet she settled over $30,000 in debt...to two of the toughest creditors around...and did it in less than six months...and she improved her credit score as well.
That is the power of doing it yourself.
I would only recommend doing it yourself under these conditions:
- You can deal with stress and pressure.
- You live in one of the 10 states where debt settlement is frowned upon when using companies.
- You live in one of the 5 states that favor the creditors rather than you (see the front-fee based debt settlement option for more details.)
- You cannot afford a debt settlement company
- You need more time than a debt settlement company can provide.
Of course...you would never use a debt settlement option just because you were mad and wanted to get back at your creditors. Debt settlement should only be used when all other options have failed.
Dealing with the creditors
You will have to deal with the creditors yourself when doing this debt settlement option.
Creditors can get quite nasty when they are trying to collect what they believe is their money. Just go on the internet and you'll see so many horror stories of debt collectors just harassing people “it'll make yer head spin.”
They can and WILL get very pushy. Especially if you have fallen behind in payments.
The original creditors (OC) can be decent to work with, but collection agencies, as a generality, are the bottom feeders.
This is a major reason the performance-fee based debt settlement options work so hard to ensure that your accounts do not charge-off.
So if you go this route of do-it-yourself debt settlement then be prepared to deal with the creditors.
Lack of knowledge to get the best settlements.
Not having the ins and outs of debt settlement industry is a big barrier for you.
Most of the debt settlement companies out there have been doing settlements for years. They know who to speak with, know what questions to ask and what to say, they know when to say some things and not say them, they know what forms to fill out, and...
They know just how to keep the debt collector off your back for long enough time for you to do the plan.
By doing it yourself you will not have these advantages.
Some banks, like MBNA (but only if they know you are not working with a company), will hand you sweet deals without you even lifting a finger. Others, like Citibank and Chase, you'll have to work for.
Of course, with persistence and insistence, you should be able to work out deals of 50 cents on the dollar or less.
Lack of knowledge of the laws.
This is biggest headache...in my humble opinion...you'll run into with trying to do settlements yourself.
After charge-off the OC will assign (send) your account to a collection agency (CA).
The CA is only by law allowed to collect the debt for the OC. You do not owe the CA any money. Of course...they'll harass you to make you think you do...but don't fall for it.
Exception: After 2 or 3 years an OC may sell your account to a collection agency. The CA s are often refer to as Junk Debt Buyers (JDB). They do own your account and can collect and keep all the money you pay them.
When a CA collects any money from you for a debt, they pass on a portion of that money to the OC and keep a portion as their commission.
An OC may have your account sent to various CA s, especially if they are not making any head way in collecting.
Sometimes a CA is an attorney firm. They will collect just like any other CA but with one major exception...after a certain time...they can sue for the debt. IF you have Citibank, MBNA, Discover, Amex (American Express) or any retail or gas cards, then you stand about a 75% chance of getting sued...in my estimation...especially if the amount due is $2000-$2500 or more.
No CA may sue you for monies owed unless they have written permission from the OC beforehand.
Key laws that you should know are...
- The FDCPA
- The FCRA
- State and local laws.
The Fair Debt Collection Practices Act (FDCPA) are the rules that mandate the CA s on collecting debts from you. You need to know these rules COLD.
I bet you that if a CA is trying to collect on a debt from you that they are violating one of these rules.
The Fair Credit Report Act (FCRA)are the rules that cover how the debts are to be reported by the OC's and CA's. Violation of the FCRA is the favorite tactic used by the CA's for your submission into paying up.
Finally, knowing the state and local laws governing CA's and OC's is a must! In some states, it is illegal for CA's to collect from you if they are not licensed in that state. You can find out about these laws with your state's Attorney General.
To learn about the FDCPA and FCRA then go to www.ftc.gov.
In summary.
I did not try to go into exactly how to do a do-it-yourself debt settlement, but only to give you a basic, general understanding of all that is involved.
No matter whether you use a performance-fee based, a front-fee based or a do-it-yourself debt settlement option you need to know what you are getting into. I hope that this helps you better understand this option so that you can make the best decision for your situation.
January 13, 2006
IRS Revoking Exemptions Of Credit Counselors
Firms Make Up Most of Industry
By Caroline E. Mayer
Washington Post Staff Writer
Friday, January 13, 2006
The Internal Revenue Service has concluded that more than 30 credit-counseling firms -- accounting for more than half of the industry's revenue -- are not entitled to tax-exempt status.
Five firms, mostly small ones, have already had their tax-exempt status revoked, while the rest have been notified of the agency's intention, according to the agency.
The proposed and final revocations are the results so far of 60 audits the IRS has been conducting for more than two years into credit-counseling organizations. The audits were prompted by hundreds of consumer complaints of deceptive business practices, including high fees, high-pressure tactics and inadequate educational services. The IRS has been trying to determine if credit-counseling agencies were misusing their tax-exempt status to take advantage of financially strapped consumers.
Steven T. Miller, commissioner of the IRS's tax-exempt and government entities division, said the agency is seeking revocations for a combination of reasons. In some cases, "we do not believe they are providing sufficient education to the debtor," he said. "Or regardless of what they are providing, too much money is being siphoned out of these organizations and going into the pocketbooks of the CEOs and for-profit affiliates."
To date, none of the credit-counseling agencies under review has been given a clean bill of health. However, Miller said, "I think some of them, as we continue, will pass muster."
The firms can appeal the proposed revocations, but, if they do take effect, "that doesn't mean we're closing their doors," Miller said. It means "they are a taxable entity and are responsible for income tax like any other corporation."
However, in eight states, including Maryland, credit-counseling groups are required to be tax-exempt to be able to offer their services.
Industry officials say the revocations could affect the economic viability of many entities because much of their funding is dependent on their tax-exempt status. About half of the industry's funding comes from banks and credit card issuers that pay the counseling firms a percentage of money recovered through repayment plans drawn up by counselors. Up to now, most banks have insisted that the counselors be tax-exempt to receive the funds, called "fair share" in the industry.
"The basis by which we survive are grants and fair-share contributions," said John C. Gormley III, head of Consumer Credit Management Services. "To the extent they are not available, they will have to be offset by the consumer," said Gormley, whose firm was notified Friday that it was about to be audited.
The IRS action comes at a critical time for the credit-counseling industry, which has been given a new, central role in the nation's bankruptcy system under changes that went into effect last October. The new bankruptcy law, designed to make it harder for consumers to wipe out their debts, requires consumers to consult with an approved credit-counselor course before they may seek protection from creditors in bankruptcy court.
The proposed revocations raise concerns about whether there will be enough counseling firms to provide that service. No one knows for sure because the IRS, under law, may not identify firms it is auditing, even to another government agency. The Justice Department's U.S. Trustee Program, which oversees the nation's bankruptcy courts, decides which credit-counseling agencies can give pre-bankruptcy advice.
It is unclear whether the large national credit-counseling firms that are currently advising thousands of debtors a month could be affected.
"Hopefully, there's no overlap, because it's going to get messy," said Samuel J. Gerdano, executive director of the American Bankruptcy Institute, a nonprofit education and research group.
Washington attorney Jeffrey S. Tenenbaum, who represents about 50 credit-counseling agencies, said he was not surprised at the number of proposed revocations and predicted more to come. But, he said, it was frustrating that the IRS has not yet given any counseling group a green light or issued guidelines on what groups must do to retain their tax-exempt status. "At a time when credit counseling has been endorsed by Congress and is now mandatory prior to filing for bankruptcy, the industry is operating in the dark as to what the IRS's tax-exemption standards are. This has created great instability in the industry."
Unless a firm announces that its tax exemption has been revoked, the only way for the public to know is through the revocation listings that the agency periodically posts. Last year, the agency revoked tax exemptions for A Better Way Credit Counseling Inc. and Gibson Trust Inc., both of Florida; National Consumer Council Inc. of California; National Credit Education and Review of Michigan; and the National Center for Debt Elimination of Pennsylvania. Most of these have closed their operations or sold their accounts to other firms. One of the agencies, the National Center for Debt Elimination, is no longer accepting new customers. President David Leuthold said the company was mistakenly set up as a nonprofit, so "we welcomed the revocation of tax-exempt status."
© 2006 The Washington Post Company
By Caroline E. Mayer
Washington Post Staff Writer
Friday, January 13, 2006
The Internal Revenue Service has concluded that more than 30 credit-counseling firms -- accounting for more than half of the industry's revenue -- are not entitled to tax-exempt status.
Five firms, mostly small ones, have already had their tax-exempt status revoked, while the rest have been notified of the agency's intention, according to the agency.
The proposed and final revocations are the results so far of 60 audits the IRS has been conducting for more than two years into credit-counseling organizations. The audits were prompted by hundreds of consumer complaints of deceptive business practices, including high fees, high-pressure tactics and inadequate educational services. The IRS has been trying to determine if credit-counseling agencies were misusing their tax-exempt status to take advantage of financially strapped consumers.
Steven T. Miller, commissioner of the IRS's tax-exempt and government entities division, said the agency is seeking revocations for a combination of reasons. In some cases, "we do not believe they are providing sufficient education to the debtor," he said. "Or regardless of what they are providing, too much money is being siphoned out of these organizations and going into the pocketbooks of the CEOs and for-profit affiliates."
To date, none of the credit-counseling agencies under review has been given a clean bill of health. However, Miller said, "I think some of them, as we continue, will pass muster."
The firms can appeal the proposed revocations, but, if they do take effect, "that doesn't mean we're closing their doors," Miller said. It means "they are a taxable entity and are responsible for income tax like any other corporation."
However, in eight states, including Maryland, credit-counseling groups are required to be tax-exempt to be able to offer their services.
Industry officials say the revocations could affect the economic viability of many entities because much of their funding is dependent on their tax-exempt status. About half of the industry's funding comes from banks and credit card issuers that pay the counseling firms a percentage of money recovered through repayment plans drawn up by counselors. Up to now, most banks have insisted that the counselors be tax-exempt to receive the funds, called "fair share" in the industry.
"The basis by which we survive are grants and fair-share contributions," said John C. Gormley III, head of Consumer Credit Management Services. "To the extent they are not available, they will have to be offset by the consumer," said Gormley, whose firm was notified Friday that it was about to be audited.
The IRS action comes at a critical time for the credit-counseling industry, which has been given a new, central role in the nation's bankruptcy system under changes that went into effect last October. The new bankruptcy law, designed to make it harder for consumers to wipe out their debts, requires consumers to consult with an approved credit-counselor course before they may seek protection from creditors in bankruptcy court.
The proposed revocations raise concerns about whether there will be enough counseling firms to provide that service. No one knows for sure because the IRS, under law, may not identify firms it is auditing, even to another government agency. The Justice Department's U.S. Trustee Program, which oversees the nation's bankruptcy courts, decides which credit-counseling agencies can give pre-bankruptcy advice.
It is unclear whether the large national credit-counseling firms that are currently advising thousands of debtors a month could be affected.
"Hopefully, there's no overlap, because it's going to get messy," said Samuel J. Gerdano, executive director of the American Bankruptcy Institute, a nonprofit education and research group.
Washington attorney Jeffrey S. Tenenbaum, who represents about 50 credit-counseling agencies, said he was not surprised at the number of proposed revocations and predicted more to come. But, he said, it was frustrating that the IRS has not yet given any counseling group a green light or issued guidelines on what groups must do to retain their tax-exempt status. "At a time when credit counseling has been endorsed by Congress and is now mandatory prior to filing for bankruptcy, the industry is operating in the dark as to what the IRS's tax-exemption standards are. This has created great instability in the industry."
Unless a firm announces that its tax exemption has been revoked, the only way for the public to know is through the revocation listings that the agency periodically posts. Last year, the agency revoked tax exemptions for A Better Way Credit Counseling Inc. and Gibson Trust Inc., both of Florida; National Consumer Council Inc. of California; National Credit Education and Review of Michigan; and the National Center for Debt Elimination of Pennsylvania. Most of these have closed their operations or sold their accounts to other firms. One of the agencies, the National Center for Debt Elimination, is no longer accepting new customers. President David Leuthold said the company was mistakenly set up as a nonprofit, so "we welcomed the revocation of tax-exempt status."
© 2006 The Washington Post Company
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