The Speech I Never Gave

A young man came up to me at a book signing yesterday and asked me if I was the one who had written Plastic Gods. I acknowledged to him that I was and he told what a great book it was and how much he'd enjoyed it. My signing had been a little slow, so it lifted my spirits to find out my book had meant a lot to this young man. As I stood waiting for the next person to stroll by, I thought about my own high school days decades earlier. Being second in my class at Buena High School I was asked to address my fellow graduates. At the time I was lacking in experience and the wisdom experience brings. I didn't really know what to say, so it turned out mediocre at best. I sighed, wishing I'd of known then what I knew now. Then I started to formulate in my mind what I would have said to my fellow classmates had that been the case.

Fellow seniors, I stand before you today to warn you of a great peril that you will face the moment you step out into the world on your own. It's a danger that will threaten your health, your happiness, your marriage and even your very freedom. The reason this risk is so dangerous is that it is perfectly legal. There are no laws to protect you, no warnings from family and friends, and you won't know that you are a victim until its too late.What I'm warning you about today is the credit trap—the lure to buy now and pay later, to live above your means, to accumulate possessions of every sort that you don't need. It's an unfortunate fact of life that our economy is driven by credit and you will be expected to do your patriotic duty and help drive the economy forward. This pressure will be manifested by a deluge of credit card applications, offers of financing for new fancy cars, a barrage of advertising trying to lure you into buying expensive home, clothes, cosmetics, travel packages, you name it.

You won't feel any pain the first few years after you fall into the credit trap. You'll be enjoying everything you've purchased on credit. Minimum payments on credit cards are low and you can draw on your credit cards or credit line if you come up short. It won't be long though until you'll find yourself in serious trouble. Lets say you have $50,000 of family income. If you did a budget you'd discover that you were probably spending $70,000. That means you're going in debt at the rate of $20,000 per year plus interest.

Interest at first may be reasonable, but the first time you miss a payment it will be jacked up to 28% and every time you go over your limit or make a payment late you'll be charged outrageous fees in above this high interest rate. Soon, in addition to your car and house payment you'll have credit card debt exceeding your car and house payments combined. You'll live with this as long as you can, borrowing from Peter to pay Paul, but eventually it will be too much and the only way out will be bankruptcy.

It's an established fact that financial stress is the leading cause of divorce. After a few years when creditors start to call, your credit goes in the dumpster, and it gets difficult to even pay basic bills, you'll start blaming your spouse, arguments will ensue, and love will turn to bare tolerance. It's very common for bankruptcy to be followed by divorce. Some law firms ofter a combination package, bankruptcy and divorce all for one low fee.

So, you've been warned. Don't fall into the credit trap. If you do, at best you'll lose your financial freedom and at worst you'll end up alone in the bankruptcy courts. Don't live above your means. The only credit you'll ever need is for a house, a car and perhaps your children's education. Pay cash for everything else.

Now here's my final piece of advice. If you follow it you'll never experience the tragedy I've just described. When you get your first job and go out on your own, prepare a budget and follow it no matter what. Change it whenever your income changes, and put in a budget item for savings. Ten percent is the amount you should save each month. Do this without fail and you'll preserve your financial freedom, greatly improve the chances of having a successful marriage and go a long way in insuring your future happiness and well being.

That's the message I wish I'd of given my fellow students back in 1969 or I wish someone would have given me. I fell into the credit trap just like millions of other American's have done over the years and suffered greatly on account of it. It's only been in the past few years that I've managed to escape and become debt free. I wrote Plastic Gods as a way to communicate this message in a manner that would be entertaining but still effective. The young man I met tonight wasn't the first person who's thanked me for Plastic Gods, but it felt good to know someone had benefited from my work.

 

Buy Plastic Gods at Amazon.com.

Beware of Debt Negotiators

With so many Americans out of work and finding it impossible to keep up with their credit card bills, there has been a proliferation of debt negotiators out peddling their services.

Some of these debt negotiators are honest and sincere but many are not. Either way it is highly unlikely that they will be able to formulate a workable plan for many reasons. First if a consumer can't afford the minimum payments on his credit cards they won't have cash for discounted settlements nor will they be able to spare any income for long term payouts. Often debt negotiators will be overly optimistic and lead consumers into a plan that is totally unrealistic and only exacerbates their perilous situation.

The truth is many of these debt negotiators care little about the consumers they claim to be helping. Some are interested only in the nice fat fee they ask for upfront, others are funded by the credit card industry itself, and others have unrealistic expectations from the consumers they represent.

In my experience when you find yourself buried in debt there are only three options. One is to drastically increase your income. This is possible by getting a better job or taking on a second one. This isn't usually a realistic solution. A second option is to quit paying the debt and hiding from creditors. Many consumers take this second option, however, it isn't very satisfactory either as creditors will try to make their lives a living hell. The only sensible option for most is bankruptcy.

Many people delay filing bankruptcy hoping for a miracle. This delay usually only makes matters worse and subjects them to unnecessary stress and anxiety. Long term stress of this type can result in divorce and even suicide.

Bottom line, if a consumer is overhead in debt they should avoid debt negotiators and file bankruptcy without delay before their financial predicament scars them for life.

Collection Agency Enjoined From Collecting In Texas

In one of our cases this the court enjoined an out of state collection agency from engaging in business in the State of Texas until they posted a bond with the secretary of state. In Texas, as is probably the case in many other states, a debt collector must register with the secretary of state and post a bond in order to do business in the state. In this particular instance the debt collector was trying to collect a debt that had been discharged in bankruptcy. This is not uncommon, as delinquent debts are traded in the marketplace like stocks and bonds. Creditors package a large number of debts and then sell them to debt buyers for pennies on the dollar. For instance, in a recent case I was involved in the debt buyers paid approximately $750,000 for 17 million dollars in debt.

The buyers are supposed to scrub the accounts to make sure the debtors haven't filed bankruptcy, but they don't always do it. Typically the debt buyers then hire collection agencies to collect the debt. These collection agencies have a duty to scrub the account for bankruptcies too, but often don't or ignore the result. If the collector doesn't collect the debt within a reasonable time the debtor buyer takes it back and sends it out to another collector.

The problem for consumers is a debt may change hands four or five times without notice such and each one may send it to a different collection agency! That's why they don't recognize the account when the collector starts calling them or sending letters. Frustrated consumers often pay discharged debt just to get relief or to improve their credit score so they can get a car or a house loan.

To make matters worse many of these collection agencies will report the debt on the consumers credit report. When the account is returned to the debt buyer they don't always report the transfer. If the next collection agency reports the debt the result is two blights on the consumers credit for the same debt. This could go on and on. I have seen the same debt reported three or four times on a debt that wasn't even collectible.

This kind of behavior is in violation of the bankruptcy discharge injunction as well as many state consumer statutes like the Texas Finance Code. Offenders can be sued by consumers in the bankruptcy court or under state law and recovery damages. Damages can include mental distress, loss of time, statutory damages as well as punitive damages if the action will willful

Will Filing Bankruptcy Ruin Your Credit?

One of the misconceptions about filing bankruptcy is the belief that it will destroy the filer's credit. The truth is filing bankruptcy often will improve a persons credit and certainly, in the long run, be very beneficial to your credit score. Typically the bankruptcy filer will already have bad credit. Credit cards, medical bills, and installments loans are often behind or the debtor has quit making payments altogether. If nothing is done his credit will not improve for at least 10 years, and often longer since the ten years that adverse credit can remain on a credit report only starts when the customer quits making payments. Bankruptcy, however, often will be the beginning of a healing process. After much of a person's debt has been discharged, the person becomes a much better credit risk and his or her credit score will begin to improve, assuming the person is employed and doesn't run up a bunch of new debt after the bankruptcy.

This improvement in the bankruptcy filer's credit will only happen, however, if the creditors properly report the debtor's credit. Unfortunately, often this isn't the case. It's important to check your credit after bankruptcy to be sure the debt is listed as "discharged in bankruptcy" and a balance of "zero." If this isn't the case not only will the adverse impact of a bankruptcy be on your credit, but also all of your old blemishes that should have been removed. A consumer can dispute adverse credit themselves, but often creditors don't correct the adverse reporting. Your best bet is get professional help in the beginning. This shouldn't cost you any money as the law provides that attorney's fees are recoverable if it becomes necessary to sue a credit to force compliance with the credit laws. Visit our website at http://protectyourfreshstart.com for more information.

How Creditors Collect Discharged Debt

We all know that when a debt is discharged in bankruptcy that’s the end of it, right? Think again. Creditors have a sack full of tricks to get consumers to pay debts that they don’t have any legal obligation to pay. In fact, there is an entire industry of debt buyers out there that most people don’t even know about. I’m not talking about the collection agencies, but companies and trusts that do nothing but buy and sell debt—some of it discharged. Obviously if they are buying the debt they intend to collect it. Below are a few of the ways it’s done.

1) Closing on a house or car. When your bankruptcy is over you will eventually need to finance a new car or buy a home. When you go to apply for a loan your loan officer will pull your credit and may tell you that you don’t qualify—unless you can pull up your credit score a few points. They suggest you contact some of your creditors that are negatively reporting on your credit report and settle the debt. You protest that the debt has been discharged but they just shrug. So, you take their advice, contact the creditors and pay off some of your discharged debt. What you were not told was the negative reporting should not have been on your credit report in the first place.

2) Several months after you bankruptcy discharge comes through you start receiving telephone calls or letters from a company you don’t recognize. You think perhaps you didn’t list them on your bankruptcy and are still liable for the debt or the collector says this debt isn’t discharged by the bankruptcy. It gets ugly from there on and you end up settling with them. What they don’t tell you is that they bought the debt from a creditor who was listed in the bankruptcy or that, in a no asset case which is the norm, an unlisted debt is still usually discharged.

3) After your bankruptcy is over you continue to pay an auto loan or home mortgage, although you don’t formally reaffirm that debt. Later on you get behind on the payments and the car is repossessed or the house foreclosed. Months later a collection agency comes along and tries to collect the deficiency. They tell you or you assume that you still owe the debt since you continued to pay on it after the bankruptcy is over. What they don’t tell you is that the debt is still discharged and usually not collectible. The creditors sole remedy, in most cases, is to take back their collateral and that’s it.

4) After your bankruptcy is filed some of your creditors will quit updating your credit report so they don’t have to report that their debt has been discharged. They hope you will voluntarily pay them later to improve your credit score. What you should know is that this trick called “parking an account” and you can dispute the account and make them update it without paying them a nickel.

What Every Bankruptcy Filer Should Know

With unemployment surging and foreclosures at an all time high, millions of Americans will be forced into bankruptcy over the next few years. They will be looking for a discharge of their credit card debts, medical bills, and mortgage deficiencies and the fresh start the bankruptcy code promises. Unfortunately, even if they successfully complete their bankruptcy filing and their debts have been discharged doesn't mean the fight against predatory lenders is over. Many creditors intentionally misreport people's credit after filing bankruptcy and some will even continue trying to collect the discharged debt.You would think there would be someone in the government making sure creditors obeyed the bankruptcy discharge and the Fair Credit Reporting Act, but that's not generally the case. That task is largely left to the debtors themselves, which means most often nothing is done and the predatory creditor is allowed to continue to ruin the lives of innocent Americans. We have all witnessed lender greed and corporate excess during the current economic meltdown and it's time we put an end to them.Fortunately there are a myriad of laws available to stop this type of abuse by the credit industry. The first is a contempt action in the bankruptcy court, the second are federal actions under Fair Credit Reporting Act (FCRA) and/or the Fair Debt Collection Practices Act (FDCPA), and the third are state court actions for defamation, unreasonable collection or violation of local fair collection laws. Unfortunately, these laws are not utilized often enough to stop this type of abuse.Two of the reasons for this are ignorance on the part of consumers and residual guilt from the bankruptcy filing. They don't know what their rights are after bankruptcy and because they feel a little guilty over not paying their debts, they are not inclined to take action against the lender whose debt has just been discharged. What they don't know is that their creditors haven't necessarily given up getting paid and sometimes won't quit until forced to do so.