Managing the Debtor/Creditor Relationship - Gregory Mannarino
The best advice I've seen for debtors on how to manage the creditor/debtor relationship.
This is copied, 100%, from Gregory Mannarino1. I’ve extracted the bit relevant to my title and added some paragraphs and other formatting. Though this is written for a U.S. audience, the general strategy, unless you’re in debt to bone-breakers, is sound for anywhere. If you don’t ask (or negotiate), you don’t get.
Break the Chains of Debt.
A Simple Guide On How to Become DEBT FREE.
By
Just imagine for a moment not owing money to anyone, trust me it is a great feeling and I want you to feel that way all the time.
Breaking the chains of debt is freeing yourself from a terrible form of indentured servitude. When we are in debt, we become slaves to servicing that debt for years, as well as paying multiples on the initial principal and this my friend is a sure-fire way to stay broke for life.
Now I am not talking about a home loan, a car loan, or a student loan. Each of these types of loans fall into a totally different type of debt, and these are not necessarily bad. However, I would consider every type of unsecured debt as bad debt in the sense that these types of loans can never create equity/wealth over time, unless of course a loan of this type is used to buy an asset which can be sold for profit.
However, it is these types of loans (unsecured) which we can easily get out from under, and that is what this chapter is all about! Truthfully, I love this stuff, and even if the credit card companies and banks were to offer me cash not to put this information in print I would probably refuse, unless it was a real lot of it I suppose!
I have heard someone say, “money is the root of all evil,” however I would say being in debt due to the lack of money is the root of all evil. Having wealth is comfortable and I am not going to lie about it. I enjoy having money and being able to acquire assets. People do not need a lot of cash; they just need enough to cover bills comfortably without having to struggle. But not having money enough for your expenses can be devastating across the board.
So, what’s our plan?
Simple. Our plan for getting you debt free involves a straightforward strategy and I am going to begin to outline it for you now.
First, I want you to gather all your unsecured debt together and obtain statements on each of your accounts.
I want you to now place them in order from the lowest amount owed to the highest.
What we are going to do is tackle the smallest accounts first and I will tell you why. If you begin to get a handle on this and start to see progress it will be an emotional boost for you.
Beginning today you are NOT going to stop paying these bills, what you are going to do is
each month send just five dollars to the lender when your bill arrives regardless of what the actual bill is for
and you will do this for all your accounts across the board.
This serves two purposes and the first is this: it’s a good faith offering to the lender which keeps you from becoming an enemy of that said lender. Keeping a relationship with the lender is important and we will go over why later.
The second purpose in sending the lender a good faith payment is it will keep you out of trouble, what I mean by that is this: if you cut off all communication with a lender and do not at least make a good faith payment, the lender can and often will win a legal judgment against you for the loan/line of credit in total.
If this happens you will then be forced to pay the loan. If a judgment is won against you in that circumstance, the loan will be either placed as a lien against property you may own or taken directly out of your paycheck.
So, let’s stick to the plan I am laying out for you.
Now, the lenders are not going to like that you are doing this, and they will begin to call you to get you to increase your good faith payment up to the minimum amount of the bill. Now in truth you do have a choice here and let’s go over that now.
You can choose to talk to them or not, my advice is talk to them. Explain that you can only afford to pay five dollars a month, do not get angry and keep your cool. Remember I want you to keep a reasonable relationship with them.
Some people cannot tolerate the phone calls as you will get them, and they can be very annoying, even harassing. If you really cannot deal with them or if they begin, call your place of work you can send them a cease-and-desist letter via fax and legally they cannot call you after that point.
However, I want you to try and deal with the calls and stick to your story that you cannot afford to send them anymore. If you cut off all communication with the cease-and-desist letter it will make it harder for you to deal with the lender later.
Keeping communication with the lender is a ploy you are using to establish a “working” relationship with the lender which you are going to use to your advantage later.
Now regardless of that, they are going to attempt to scare you with threats of late fees and interest rate increases however do not be intimidated, if you stick with this plan, they have no recourse, and you are in control. The late fees and interest rate increases do not matter at all, more on this later.
Now over the next few months I want you to accumulate some cash,
once you have saved about 25 percent of the loan you are going to call the lender and make them an offer to settle the account.
If you have done this within six months of beginning this process the loan most likely has not “charged off” yet, that is the lender still owns the loan. If a loan charges off, that means the lender has sold your loan to a collection agency or secondary party who has bought your loan for pennies on the dollar and now you will have to deal with them at that point. It really does not matter who you deal with, either the original lender or the collection agency/secondary party, it will still work out nearly the same for you in the end. If you can work with the original lender before the loan charges off you can often get a better deal, but if you can’t, don’t worry about it.
So whatever time frame you work out, and whether you are dealing with the initial lender or a secondary party, you will establish communication and make them an offer to settle the account.
Most often you can settle any unsecured debt for 40 percent of the initial loan, any late fees which have accrued will be removed in total as you settle.
Now you may be able to settle these accounts for much less than 40 percent of the principal. I had a $25,000.00 line of credit with Bank of America which I settled for $6,000.00, that’s just 25 percent, but on average you will be able to negotiate for 40 percent of the principal. You have other options as well, once you do reach a settlement on the account(s) you do not have to pay them off at that time unless you want to, you have 3 months to do it.
So, let’s say you owe ten grand on account XYZ, and you settle for four thousand, (forty percent), you can split this into 3 payments with no fees or interest. If you have multiple accounts with unsecured debt, you can repeat this scenario for each one until you are debt free. Once the lender or secondary party (collection agency) settles with you, you are legally free and clear from any obligation towards the said debt(s) forever ah yes!
So, you had no idea it was this easy, did you?
And this is what all those companies who advertise offering “debt relief” are counting on, you not being aware. Glad I could help!
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If I had debts... Wonderful info! Many will be helped, I am sure!
Maybe I should see what places will let Me indebt Myself to Them for things I need...like a home!...after having no credit for 20+ years... (And homeless most of that, too.)