It’s Time to Stop Paying Your Debts. Yes. You Absolutely Read That Right.


Who do you think you are?

No, really. Do you think that you’re special? Some kind of failed, Hancock-esque superhuman? Do you think you’re the only one on earth who is going through what you’re currently going through? Think you’re the only one who’s fallen for the deadly trap of credit and debt?

You’re NOT.

So now that we have an understanding, lets talk.

If  you are currently dealing with a large amount of debt, then I  believe its high time for you to stop sulking and create a damn gameplan. Your situation can no longer be allowed to consume you. From this day forth, you will stop giving up valuable years of your life. There can be no more allowing yourself to continue living in a stressed out uber-funk lifestyle where you constantly extract your own anger and force it on the ones around you. Its affecting you mentally, physically and spiritually and it’s not fucking worth it. At all.

I mean, you’ve been living like this for what? To continue the support of your public image? Maintain a specific lifestyle? To avoid embarrassment? Or even better yet- to ensure access to credit and to try and keep your scores “high” so you can use the very thing that got you into this situation in the first place?

Listen to me. If you aren’t already aware, there are three yous to you. Before you dismiss it, try and think about this for a moment. There is the previous you– the person who created these debts you’re currently facing and who most likely generated them through a lack of proper financial education. There is the current you who is suffering right this moment because of the decisions the previous you made. Then there is the future you who will not only be affected by everything the previous you and current you has/is doing but that also understands that without the current you getting into gear, the future potential suffering could be worse than anything any of yous have experienced so far. It’s the pain of waking up at 78 years old and realizing that you’re out of time on this earth due to the squandering of it. It’s the full realization that you’ve wasted so many years of your life being unhappy and miserable without correcting the underlying problem – your dependency on the use of credit and the willingness to trade a fulfilling life for a stressful life simply to  play in society’s debt game. Please make no mistake,  there isn’t a so-called asset on earth that is more important than time- not your car, house, boat, clothing or even highly paid corporate job position.

So lets look at the current you. The current you is trying to survive on a $38k income while fighting a deficit in your budget of near $1600 each month. Your total immediate debt is upwards of $50,000 and growing by the day. More than half of that is in delinquent credit card payments and back mortgage payments. You’ve already sold everything you thought you owned. You tried to sell the car you’re paying on but you’re upside down on your loan. The house you reside in is half the value it was when you first took out a loan to purchase it. Your employer no longer offers medical coverage so you’re attempting to figure out a way to fit the payments of a much-needed medical procedure in your monthly budget. You have student loan payments that are the same as most people’s rent and you’re not even working in the field of your choice due to overcrowding. To keep it 100% and put it all on the table: you’re at the end of your damn rope.

Everyday I deal with at least a dozen people in my field of professional debt counseling that are just like this and who are stressed the fuck out, fighting with their spouses/significant others, substance abusing, depressed, lost & straight up hopeless. So in my field, what are we trained to do in this situation? What are we encouraged to say? “Protect your credit at all costs, pay down your debts and do whatever it takes to never ever EVER file bankruptcy.”

Fuck that.

See, truth be told, I wasn’t going to write this at first. However, now I, myself am FED UP.  I’m fed up with society, #1. I’m fed up with all the rules and judgmental attitudes society imposes as a whole. I’m also fed up with society robbing the minority people of my community of their joy and really, their lives. I’m sick of my clients and the people in my community ALLOWING society to rob them of their joy and their lives. Even worse, I’m sick of society (which indeed is controlled by big businesses) being ABLE to do this simply because it has successfully gotten 99% of us to believe that we aint shit without material possessions and credit scores.

You know what this is called? Mental slavery. And its worse than the physical kind. A physical slave who hasn’t drunk the kool-aid can be physically freed and allowed to lead a productive life. However, if you control a slave mentally, they will never be free – mind nor body. This is the very idea that is described in the Matrix:

So what does someone so caught out there with all of these bills piling up do to free themselves of  the slavery of debt? Simply stop playing the game. Allow me to explain.

Below are some of your options along with some things you believe are your options:

  • A. Negotiate your balances/interest rates down, directly with your lenders (must be items you haven’t defaulted on)
  • B. Debt settlement Plans
  • C. Stop paying on everything and hope for the best
  • D. File Bankruptcy

A. Negotiating your balances and interest rates on items you have yet to default on

Sure, most people who cry hard enough over the phone and stay persistent can find someone in customer service to lower their interest rates slightly or most likely temporarily on many current consumer loan products. But even if you were current on all of your bills, there is no slight adjustment or temporary fix on earth that could cure a $1600 deficit of bills to income each month. Instead, what you really need to even make a close dent in your monthly budget is a reduction of the principal on your accounts. Sound like the ultimate solution right? Well if you’ve never actually tried to convince a company that you owe money to lower your balance on an account that you’re current on, I want you to try it first then come back to this post. Meanwhile, the rest of us will be moving on…

B. Debt Settlement/Debt Management (because you’ve already defaulted)

Debt settlement according to Suze Orman:

Don’t ruin my credit? Is this b*tch half crazy? You want me to trade 15-25 years of my life and struggle to correct a decision simply to please the people who view outstanding, unpaid debt as irresponsible?  A decision I unwittingly made because the way society aims to keep people financially illiterate so they stay working in the system instead of owning companies in the system? Spend half my life and paying $50k worth of debt especially when I don’t have to? You have GOT to be kidding me. My time, sanity and health are way more valuable than that.

Sure, the points she makes are valid about the actual debt settlement process in itself and I must also urge you to NEVER EVER EVER use one of these programs.  However, what she purposely fails to address and what is actually the most important thing on earth to every single person in this situation is whats called the Statute of Limitations. This brings us to option C.

C. Stop paying on everything and hope for the best

There will come a point where you ask yourself- “What if I just said screw it and stop paying everything. I can stop these automatic withdrawals, stop answering all of these harassing phone calls, move on and completely start fresh.” Well to be fair, this is both true and false and it’s mainly because of the Statue of Limitations in your specific state.

The statute of limitations in California for example, basically states that if you are able to dodge any creditor that you have a written agreement with (besides those who hold student loans, child support, alimony and tax debts) for more than 4 years for the date of default on each specific loan, then those creditors are not able to successfully gain a judgement against you, should you be taken to court. But equally important- it also states that if you make out a written promise of payment, even after that 4 year time frame is up, then you have successfully restarted the process and you are officially able to be sued successfully again. And in other states you can even restart the S.O.L. by  simply calling these collectors and having a recorded phone conversation with them while offering to pay the debt.

What does this have to do with Suze Orman? Almost 90% of the people I work with come to me to try and attempt to “fix their credit” by starting to make payments on old ass accounts- accounts that are past the statute of limitations time frame. So in essence, by Ms. Orman suggesting that each person call and negotiate with these collection agencies so that they can try and get settlements ( settlements that some people will be taxed on anyways) she is ALSO allowing you to unwittingly restart the statute of limitations  along with your ability to successfully be sued. And no, just like many of the people I work with assume, paying old debts does NOT change your credit score. Items on your credit report will remain on your report for 7 years from it being charged off. (Read my previous post that goes more into depth about how the statute of limitations works here.)

So then what does the person who has tried to do everything they could to raise their income yet was still forced to recently stop paying debts that are huge enough to be sued for do in this case? ( By large enough I mean like $50k of debt when you have just $1k or $2k in actual assets  and you only bring in $25-$30k/yearin income). And what if you’re still current on your huge debt sum, have yet to miss a payment but know the whole thing is about to topple over any day now? This leads us to D. File for bankruptcy.

D. Bankruptcy (Chapter 7)

In a Yahoo Finance article titled “How To Rebuild After Losing Your Fortune” , the author chronicles a Connecticut couple struggling with whether or not to file BK:

There was a break in the spring of 2009, when their son got accepted to Georgetown–with a full scholarship, since the family income had fallen to practically nothing. “That was a huge weight off my shoulders,” Daum says. “I finally thought, ‘I can’t screw him up!’ ” But their finances continued to erode. Daum had a spat with his wealthy friend, and that assistance disappeared. He felt guilty exercising instead of working and gained 40 pounds. The stress of continually coming up short mounted. “When it got to August [of 2009], I finally told Deanna, ‘I can’t beg for money anymore,’ ” Daum explains. “I looked at her and said, ‘It’s over. It’s time.’ ”

It wasn’t hard convincing her. As a bookkeeper, Deanna thoroughly understood their financial predicament. “It was an emotional struggle to let go,” she says. “Before, I would panic about the possibility of a derogatory mark on our credit report. But I probably detached sooner than he thinks. We were beyond emotional at that point. It was more logical.”

An attorney OK’d the plan, and Kevin and Deanna decided they’d file his and hers bankruptcies. Deanna filed hers last fall; Kevin held on a bit longer but filed this spring. That meant they’d default on the loans they held, including the mortgages on four homes, which would trigger foreclosure proceedings. Their credit ratings would be wrecked, making it nearly impossible to get a conventional loan.

Yet they both felt an immediate sense of relief. The creditors stopped calling. It was easier to concentrate on new business without worrying about old loans. They decided to abandon Connecticut altogether and consolidate their life in a new apartment they’d rent in New York, aided by a weak housing market and falling rents. And living in New York meant they could get by without a car.

A few regrets nagged at them. Deanna, who’s now 43, felt that if they had capitulated sooner, they might have been able to save a bit more money and borrow less from friends. With his history in the lending business, Kevin, 45, felt remorse at defaulting on the loans for four properties. “It’s not like we’ve been bad spenders,” he pleads. Before declaring bankruptcy, he even tried to arrange a “short sale” on the New York apartment, which would have entailed selling the place for less than he paid in 2006 and splitting the loss with the bank. But the bank didn’t even respond to his suggestion, which made the ultimate decision easier: “At that point, I figured, ‘The banks aren’t doing me any favors, and they’re getting bailed out by the government anyway. I’m going to stop worrying about them and start worrying about myself and my family.’ “

Now for those who are afraid of the “implications” of bankruptcy and how it affects your credit: isn’t that the problem? You’ve lived your entire life worrying about how things may or may not impact your credit! Unplug yourself. Let go. There is no such thing as responsible use of credit. Smart people who are wealthy understand that you should never pay interest on anything. For 100% of Americans, the very act of using credit is the very act of living outside of your means. There is absolutely no reason on earth you need to utilize credit- not to purchase electronics, not to find a place to live, not to purchase a car or even rent a car. (Learn more about why you don’t need credit to purchase jack, here.)

But lets be clear, the use of credit as something you need in order to make purchases is a null & void issue. However, keeping a clean credit report to pass certain non loan criteria is still beneficial. When it comes to a bankruptcy on record, one area where you may have a set back is in a select number of employment situations. According to MSN.com, even though there are specific federal laws barring employers from refusing to hire you due to bankruptcy, about 25 percent of hiring managers who actually run credit checks (thats 25% of the 60% of employers who actually run credit checks- 40% of employers do not run any at all) stated they would still overlook an applicant with a BK on record. Should that detour you from reclaiming your life, reducing your stress and increasing your health? Hell no. I don’t know a job on earth that is worth spending the next 15-20 years of my life in a state of depression simply because I didn’t have the balls to start over from scratch.  A bankruptcy is visible for 10 years from date of a successful filing. Paying off 50k in credit card and car loan debt with compounding interest each month could last you twice that time frame if not more. And remember, there is no credit filing on earth that will bar you from becoming a successful, highly paid entrepreneur.

Lastly, I’m also fully aware that many of you no doubt have fears about the “social stigmas” of bankruptcy. But if this is the case, you should really be looking at the cause of that fear as your enemy and realize again, more likely than not, its how you got into this situation. Yes, it was the overspending, impatience and addiction to what you perceive as “free money. But at the end of the day it boils down to us always worrying what our neighbors think, what society thinks and the continuous attempts to keep up with the Joneses at all cost. Well I’m here to tell you f*ck what the Joneses think and f*ck anyone who doesn’t understand how beneficial filing for bankruptcy is

So get your life back. Do it  and do it before it’s too late. Let the current you make up for the mistakes of the previous you and insure prosperous times for the future you. Also, no matter what, at the end of the day I need you to remember:

“It’s only after we’ve lost everything that we’re free to do anything.”

-Tyler Durden (Fight Club)

=========================================================

For information on what you’ll need to pass the bankruptcy means test and median income test for your state: http://www.bankruptcylawnetwork.com/2007/01/26/median-income-means-test-important-terms-defined/

For additional info on why debt settlement is for suckers, visit: Walletpop.com

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12 thoughts on “It’s Time to Stop Paying Your Debts. Yes. You Absolutely Read That Right.

  1. Carl

    I can only speak for myself and my bankruptcy practices. I’ve been an attorney since December 1993. Prior to opening my own practice 5 years ago, my other practice was representing creditors to collect debts. Now I focus on representing debtors.

    The vast majority of my cases are Chapter 7 matters. In that time period, one of my clients was partially denied a discharge for a $4400 cash advance taken at a Las Vegas casino. They couldn’t afford my fees for the additional work to defend against the adversary proceeding. They still received a full discharge of their debts as have every other Chapter 7 client that has retained me. Rarely do I charge more than $2000 in legal fees for a Chapter 7 case.

    I have never seen a debt management plan succeed and I’ve only seen 2 people in the last 5 years that were better in negotiations than bankruptcy. And if someone “qualifies” for a DMP, they are almost always better off in a Chapter 13 bankruptcy instead of a DMP.

    Chapter 13 cases do have a high failure rate for the same reasons that DMP might fail. It can be a long commitment and circumstances can change. Expenses can increase and jobs can disappear.

    I take a global approach to a client’s case. I look at their goals and where they might be in 6 months to a year. Unless there is a specific reason to place this in a

    Chapter 13, I try to place them in a Chapter 7. Most Chapter 7 cases last no more than 4 months and allow the debtor to get their fresh start. In 6 to 12 months, most of my clients see their credit score higher than the day that I filed their case.

    Bankruptcy isn’t right for everybody, but my experience has shown me that it is almost always superior to a debt management plan.”

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  2. I fall into the situtation you have described here, with two exceptions: One, I have about 20K in debt, not 50K, and Two, I lost my job about a year ago and have not found one since…so I have NO income. I have gone the ‘screw it’ route and stopped paying everything about 11 months ago.
    I have recently started my own business, and am seeing some positive responses, but not in the black yet. My concern is, what if I have judgements placed against me? Will they take any positive income I generate from my business? Do I even have enough debt for them to screw with? Or should I declare bankruptcy? I live in Missouri.

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    1. Hi Kim,

      I’m sorry to hear that your situation has been tough as of late. I do believe you can come out of this ontop though.

      Any court judgements from creditors would garnish your bank accounts since you are prob a sole proprietor. A good way to protect yourself in the future is to form an LLC because businesses attract lawsuits like no other. You should protect yourself even on non debt lawsuits.

      If you have zero income and $20k worth of debt I would definitely sit down with a local bankruptcy attorney and do a free consultation to figure out if you will pass the means test. Right now it seems as if you would. If you do not qualify for bankruptcy then you could either A- implement a debt snowball once you DO start to generate income or B- run from them and try to make it to the 5 year mark. Ofcourse B is extremely risky but yes, Missouri statute of limitations on non student loan, non tax, non child support debt is 5 years from date of default.

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  3. James

    Here is my scenario: my wife and I live in California, have (had?) about 26K in debt in 2004 when I first lost my job (only bread winner for a long time) – – we just stopped paying our bills…**ALL** our bills except for rent, electricity, phone, etc…

    We endured the constant phone calls…NEVER picking up the phone, letting it go to voicemail (we just turned off the ringer), ignored the collection letters… and just went about our daily lives. The debts have been sold and resold to various collection agencies over the years – – so we really don’t know who is holding what at this point.

    So it’s going to be 2011 – – nearly seven years since all this began. What are our options? What will happen at “seven years”? Can we ask for the collection agencies to stop? We haven’t checked our credit report in 4+ years because we became so disillusioned.

    Your input would be appreciated.
    J

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    1. Hi James,

      You’re actually better off than a lot of people, believe it or not. Remember, it only counts as an official debt if its enforceable or you feel morally wrong. Otherwise its charity. Especially in your case where the California statute of limitations has run its course (4 years for most debt besides taxes, child support and student loans), you have a pretty clean “get out of jail card” you can use if they ever threaten or bring legal action.

      In terms of who owns the debt..who knows? Yes they still can legally “request payment” on any and all non paid debts. Yes they can call you and annoy you and there is no time restraint on that. Yes it will still be reported on your credit report for 7 years (7 years and 180 days if its a charged off credit card). Yes you could piece together the puzzle of who actually holds these debts by contacting the last collector shown on your report and asking if its been sold and who to. But the real question you have to ask yourself – “Is keeping $26k in my pocket worth me dealing with avoiding these people?”

      If the answer is yes, then first, in regards to a collector having the ability to request payment, call you and annoy you, all you have to do is request their address then send the letter I’m going to paste below. They are legally required to stop harassing you after receipt of the letter. Make sure to send it certified.

      Second you’re outside of the statute of limitations to be sued (as mentioned earlier). Next, in terms of credit reporting, you’re almost to the 7 year finish line from the date of charge off. It has to legally fall off all three bureaus credit reports or you can dispute the item on basis it violating the Fair Credit Report Act by having a date of last activity over 7 years and 180 days from whatever day you are sending.

      Collection Agency Letter:
      Your Name
      Your Address

      Collector’s Name
      Collector’s Address

      Mr./Ms. Collector,

      I am writing in response to your constant phone calls!

      According to the Fair Debt Collection Practices Act, [15 USC 1692c] Section 805(c): CEASING COMMUNICATION: You must cease all communication with me after being notified in writing that I no longer wish to communicate with you. Therefore, I demand that you stop calling me at home, at work, on my cell phone or at any other location!

      In accordance with the federal FDCPA, now that you have received this “stop calling” letter, you may only contact me to inform me that you:

      are terminating further collection efforts;
      invoking specified remedies which are ordinarily invoked by you or your company; or
      intend to invoke a specified remedy.

      Be advised that I am well well aware of my rights! For instance, I know that any future contact by you or your company violates the FDCPA and that since you already have my location information, calls made by you or your company to any 3rd party concerning me violates section 805(b)2 of the FDCPA.

      Be advised that I am keeping accurate records of all correspondence from you and your company, including tape recording all phone calls. If you continue calling me I will pursue all available legal actions to stop you from harassing me and my family.

      Signature
      Your Printed Name
      ————–
      Info on disputing old items:
      http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.shtm

      Hope this helps! Let me know if anything here doesn’t make sense.

      Like

  4. Pingback: Stop paying the National Debts! | HunabKuBlog

  5. Hasiyna

    I don’t know who you are per se but you write the most awesome reports about the credit game. Finding your articles has been a God sent for me because I was just about to allow myself to fall right into the credit game again!
    Please continue to write so many people need this infomation. Thank you,

    Like

  6. a2santos

    Thanks for sharing, you just helped a little sister take the first step to being free!! Please keep writing and sharing – your message is clear and the delivery is on point.

    Like

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