I generally begin any consultation I do with people who reach out to my company in search of help with debt with this question: “What has you reaching out to a perfect stranger? What is going on with you financially”? Then, I shut up and listen. I am sometimes the first person the caller has ever spoken to about the situation they are in.

The responses I hear vary, as does the time someone will take to outline the details of their hardship. By listening closely, I am able to hear the stress and fear they have about their debt. I often hear the struggles they have gone through to try and keep current with credit card bills, or the difficulty they have had in communicating with creditors and collectors.

The other day, I heard one of the simplest and shortest answers to my initial question that I have had to date.

“My Debt Is Crippling Me.”

While this response does not provide details I generally look to key off of in order to identify the debt pieces or solutions to putting the person’s financial puzzle back together, it said a great deal in a very powerful way.

Struggles with debt DO feel crippling. In the very sense that someone with a physical disability is forced to deal with every day of their lives. The stress and fear with debt problems are debilitating and can often manifest into actual maladies. The worry and frustration about money, and the lack of money, carries over from one day to the next. What am I going to do at the end of the month when these other bills are due? When will I ever be out of credit card debt? How did I get trapped in a home now worth far less than I owe? What if I get laid off with no savings? How would I get by with maxed out credit cards and no income?

One of the overwhelming benefits to people we talk with is that we can reduce, or even remove the stress and fear they have about their debt problem in one phone call.

This gentleman did not feel crippled when we finished talking about his problem because I plainly laid out the facts of his finances (after several additional questions to be sure), and was able to point out to him the mathematical rational solution to his debt. His solution did not involve needing to engage my company for a product or service, as he was past the point of debt settlement or a creditor sponsored hardship plan being a viable option.

He learned that, unlike someone who has a physical disability for the rest of their life, his crippling debt could actually be cured and with little fuss or expense. He was not at all excited to know that his only real option was to file for chapter 7 bankruptcy, but he saw the wisdom in doing so and hung up the phone with no fear and less stress.

I asked him before we hung up from the call “How crippling is your debt now?”.
He replied “Not at all.”

There is always and answer to recover from debt. The answers do often involve tough choices and some action steps that are not exactly a thrill to take, but can be arrived at through the process of elimination. Generally, I can walk through the following things and eliminate 3 or 4 out of the 5:

• Creditor monthly payment concessions
• Debt Management Plans through a credit counseling group
• Bankruptcy
• Debt Settlement
• Doing nothing (sometimes the right thing for brief period – couple months)

Knowledge removes the fear of the unknown, and unemotional, boring, old arithmetic is the compass to find your way to healthier finances.

My advice to anyone feeling crippled with debt boils down to the “Four Gets”:

• Get real about your finances;
• Get informed about your options;
• Get a plan in place; and
• Get started

If you would like to start getting informed the same way the man who inspired this article did, send me an email to schedule a consult: michael@consumerrecoverynetwork.com. I will consult with you personally.

I can also recommend scheduling time to speak with any member of the American Association of Credit Counselors (AACC) who are a diverse group of debt relief service providers committed to excellence working with people in debt.

Media Contact:

Ken Luck

(336) 553‐1804

kluck@rlfcommunications.com

Debt Relief Companies Form New Consumer Advocacy Organization

Raleigh, N.C. (Feb. 9, 2011) – In an ongoing effort to raise standards in the debt relief industry and improve consumer protections, a diverse group of leading debt relief companies have formed a new organization devoted to consumer advocacy. The organization is spearheaded by Steve Rhode, aconsumer advocate and founder of the website GetOutofDebt.org. Membership is by invitation only to companies who promote transparency and have a demonstrated track record in properly helping consumers address financial hardships.

The American Association of Credit Counselors (AACC) will include nonprofit credit counseling agencies, debt management companies, debt settlement companies and other providers who are focused on serving consumers in financial distress. The AACC name reflects the revival of an organization that existed with a similar mission but has been defunct for more than 20 years.

This is the first debt relief association formed solely to find collaborative ways to work for the betterment of consumers rather than to lobby on behalf of the industry.

“We’re not an official association, we’re not a traditional industry group that anyone can join as long as they are willing to pay the membership dues,” said Rhode, one of the most vocal and active advocates for consumer interests. “We’re really a club, a club that only accepts the best companies who’ve demonstrated a commitment to the highest standards in serving consumers and who want to work collaboratively to protect consumers facing money troubles.”

All member companies in the AACC have agreed to a set of common standards, including:

• • Charging no upfront fees for debt settlement services;
• • Providing customers with good faith estimates before they enroll in any debt relief service;
• • Outlining the potential risks of a debt settlement or debt management program in easy‐to understand language;
• • Providing openness and transparency regarding performance results; and
• • Making top management readily available to their customers.

The group has adopted the motto “Putting Consumers First.”

“We are thrilled to be a part of this group, which is really focused on creating educated consumers and campaigning for their rights and protection,” said Chris Schornak, president of Debt Solutions Network, one of the founding members. “There are a wide range of debt relief options out there, but not every option will work for every individual. It’s exciting to see a group of companies standing up and saying that education is more important than deception and that the needs of the consumer are more important than a company’s bottom line.”

The genesis of the organization came out of an event Rhode hosted in late November called “A Group Conversation about Restoring Truth to Debt Relief.” The day‐long meeting brought together heads of debt relief companies, consumer advocates and regulatory agencies to discuss ways to improve consumer protections while still making debt relief services available to those in need and explore ways to increase the credibility of legitimate debt relief providers.

“That meeting created some great conversations among various debt relief providers about ways to better the industry as a whole and to make services from credible providers more readily available to consumers,” said Rhode. “Those discussions have continued over the last few months as these companies, while competitors, have found they have common interests and a shared vision for improving the industry. They felt there would be strength in numbers and have decided to work together for change.”

Charter members of the organization are:

• • Active Debt Solutions, a Florida‐based company that offers credit counseling, debt consolidations, bankruptcy referrals, and debt settlement programs;

• • Cambridge Credit Counseling , a Massachusetts‐based nonprofit that offers financial education and debt management services;

• • CareOne Services Inc., a Maryland‐based company that offers credit counseling, debt management and debt settlement programs and bankruptcy referral services;

• • Consumer Recovery Network, an Idaho‐based company which provides DIY instruction and offers debt settlement services

• • Debt Solutions Network LLC, a Michigan‐based company that offers debt settlement and debt consolidation services;

• • New Era Debt Solutions, a California‐based company that offers debt settlement services; and

“We take great pride in being part of a group that puts consumers first,” said Alex Viecco, vice president of New Era Debt Solutions. “This is something that has been lacking in this industry for a very long time.”

The original AACC was created in 1955 and disbanded in the 1980s.

About the American Association of Credit Counselors

The American Association of Credit Counselors was founded with the mission of “Putting Consumers First” in debt relief services. Membership in the organization is by invitation only and all of the members have agreed to meet specific standards and principles in offering their services. The AACC has eight members. For more information, visit http://newaacc.org/.

Mish has a post up today: Food Stamp Usage Up Nationally

It shows my state of Idaho having the largest year over year increase in residents receiving food stamps, or what is now referred to as SNAP. SNAP stands for: Supplemental Nutrition Assistance Program.

Reading the post was timely for me, as you will understand in a moment. After reading some of the comments to the above linked post by Mish, I was motivated to post a comment of my own.

I am writing this post and sharing the contents of my comment with readers of DebtBytes because many may not know the policy we at Consumer Recovery Network adopted to help feed those who often go hungry inside the communities of many of our customers across the nation.

Here is the comment I left:

“I have been reading Mish for years and assume this post is intended as a real time representation of deflation.

Reading the comments (and the fact that I am really hungry right now), prompted me to add to the discussion.

Today my family is participating in “Feel the Hunger“.
I made my daughters each a 1/2 cup of rice before school. It’s all they get to eat for the whole day. My youngest ate 2 tbls prior to leaving and took the rest with her. My oldest held off from eating any, but took the full 1/2 cup with her.
All I can think of right now is bacon…

There are many locals in my small North Idaho town participating.

This is a good learning tool for my daughters.

There are local answers to hunger, but they depend upon the participation of those better situated.

The work I do at my company focuses on assisting mostly middle class families in financial turmoil. For those suitable to use the approach we advocate, we provide a good alternative to bankruptcy (mostly alternative to chapter 13). Our fee since opening our doors for any direct hands on service is wholly contingent upon our success. In over 20 states we do not collect the fee, but still provide the service. In lieu of collecting the fee we encourage our customers donate the calculated fee to low income legal aid in their area, or to their local food bank in the form of nonperishable food items.

We are not a nonprofit. We like profit as much as the next guy, but we keep our fees low and our results and retention high. Our reputation is exemplary in an industry known to scam and leave people in a lurch.

We do the work we do, the way we do, for a myriad of reasons.

We do not advertise, as the cost would be borne by our customers who are not in the best position to fund higher fees. We mostly rely on word of mouth and organic exposure.

My point: Be part of the solution when and wherever you can.

Man… I could go for burger right now…”

The people we help here in Idaho and in Mish’s state of Illinois are included in that list of over 20 states where we encourage donations to those in need.

I will cover why we designate low income legal aid offices as donation recipients in a later post.

Companies like Consumer Recovery Network exemplify, in our chosen unique way, good corporate citizenship. If you have the ability, next time you stop for groceries, consider picking up a few extra food items and drop them off at your local food bank.

Oh, and if you happen to be in Sandpoint Idaho, I could go for a bacon cheeseburger right now….

Double Oh, check out Mish’s blog. He gives a rip about the state of economic affairs in this country.

The term “charge off” describes an accounting function followed by your lenders. When speaking of revolving consumer credit card accounts, a charge off occurs when the credit issuer either chooses, or must, recognize an unpaid loan balance as a loss.

For lenders, losses are bad news. The bad news gets reported and can affect anything from loan loss allowance/reserves, securitization, liquidity, even solvency.

Because of the bad news nature of a charge off, your credit card issuer will generally wait until the maximum time allowed to charge off your unpaid debt. The time frame for your creditor to recognize the loss on your unpaid credit card balance is outlined in Generally Accepted Accounting Principles (GAAP) and is typically 180 days of consecutive nonpayment, or what the Office of the Comptroller of the Currency (OCC) has designated as “seven zero billings”. There will be instances where charge off will seem to occur at 210 days of nonpayment.

Most lenders will wait as long as is allowable to take the charge off hit to their books, but they can take the hit earlier than 180-210 days. It’s just not a common practice.

What does this mean to you?

While charge off is an important accounting function for lenders, it is also a major event that applies to, and will affect, the efforts of a consumer who is experiencing financial difficulty.

While you are trying to navigate your inability to pay all of your debts and when evaluating the different debt relief options available to you, understanding the timing and affects of your accounts charging off will give you a needed advantage in your planning and timing.

The period leading up to, during, and after a charge off of your unsecured debts will impact:

• Debt collection efforts with your original creditor
• Debt collection with outside collection agency
• Debt Purchasing and subsequent collection efforts
• Debt Settlement/Debt Negotiation
• Credit Reporting
• Debt Management Plans
• Risks of being sued on unpaid debt
• Biting the Bullet and Filing Bankruptcy
• Delaying a Bankruptcy

Each one of the bullet items above are deserving of a separate article and will be posted on debt bytes as I complete them. If an above bullet is a click-able link, it will lead to coverage of that topic individually.

If you would like to speak with a pro for free to discuss your specific situation and what you may be able to do to deal with it, Click: Free Consultation Request. You will be contacted by a CRN specialist who can assist you in identifying your options and next best steps related to pre or post charge off debts.

For the past many years (and through 10/27/10), Debt Settlement service providers have, in large part, been able to charge fees, whether they were helpful to consumers or not. With new rules issued by the FTC, companies offering settlement services will now have to earn their keep in all 50 states.

There are many attributes to the new rules that will benefit consumers looking for reputable and honest companies to assist them. I will cover many of these consumer protections, in detail, throughout the next several weeks, here on DebtBytes.

I want to expand on Block’s article where she quoted me from an earlier interview, saying:

‘Michael Bovee, founder and president of Consumer Recovery Network, a debt-settlement firm that doesn’t charge upfront fees, agrees. Many consumers who have signed up for debt settlement in recent years should have filed for Chapter 7 bankruptcy’, he says.

I meant what I said in this quote. It is as applicable looking forward as it is in the looking backward context delivered above.

Debt Settlement is not the right solution for everyone struggling to pay their unsecured credit card bills. Not by a long shot!

Nobody wants to file for bankruptcy. The debt settlement industry has been able to leverage this fact exceedingly well with over hyped and over the top claims that debt settlement is a panacea to the debt woes of middle class America. What the FTC found through the 2 year process of crafting these new rules, and from their own enforcement actions, as well as those by state regulators is; AT BEST, Debt Settlement has only worked for roughly 1/3^rd of the people who try it. Some sham companies that have been shut down were shown to have only been successful with less than 5% of their client base!

Why?

Debt Settlement marketing has been designed to enroll the wrong people, along with the right people, because the fee model used by most companies allowed them to get paid, regardless if they delivered on their claims or not.

The FTC rule changes will chase away many of the “fee grab” marketers from the industry, as they will not be able to “sell” settlement as some easy, soft, “just send this less painful amount of money to a set aside account monthly and we will handle the rest” approach. They will be unwilling to wait to get paid their commissions from people they sign up who cannot fund settlements for sometimes 6 and more months (or at all).

WARNING: The soft sell of debt settlement, even with all of the new disclosures and the upfront fee ban, will still persist after all of the FTC rules take effect.

It may take a while for companies to realize they are shooting themselves in the foot by accepting clients who are ill suited to try to avoid bankruptcy through a debt settlement (often referred to as debt consolidation & debt negotiation) program. So, consumers are still going to have to be thinking through the math to see if they should try debt settlement. It is always the math that should determine whether settlement is right for you. Math & Timing… Math & Timing… If these two things do not sync, given your current finances, debt settlement is NOT right for you!

“Debt Settlement – The Math & Timing” will be Thursday’s post her on DebtBytes. Don’t miss it!

If you want to learn more about these 2 crucial aspects to debt settlement:  Schedule a consult with a CRN specialist on line or call 800-939-8357 ext. 3

Otherwise, Be Careful! It’s still a jungle out there.

You are Invited…

…to share your story, feedback, and/or review of your experience working with Consumer Recovery Network in the comment section of this post.

There are no rules for posting. You may want to follow an outline of what brought you to CRN, how we compared to other options or companies you looked into, what happened along the way, and what the ultimate result of working with us has been, to date. Or, just have fun and express yourself!

ALSO:

Not everyone we consult with qualifies for our more aggressive approach to dealing with debt. Many of you we consult with still appreciate the time we take to inform you of what debt settlement really involves after having contacted other service providers. Our consults are often a refreshing dose of blunt honesty for people just looking for information and answers they can trust. You are invited to share too!

Tell you what….if you having anything to share about CRN, the Debt Bytes Blog, or any facet of the work we do…. chime in! We look forward to hearing from you!

P.S. You can identify yourself using your initials or first name only, unless you are comfortable sharing your identity, like Jonathan Grossman, who blogs about his experience with CRN at Debtsettlementstory.com

Your Credit Scores Less Than Filing for Bankruptcy

FICO, the company that calculates consumers’ FICO scores — the scores that are the most widely used by American creditors to determine whether or not they will extend credit to a particular consumer and the terms of that credit — recently released data showing how different negative actions consumers might take in regard to their credit will affect their scores. Among other things, the data shows that settling your debts is far less damaging to your FICO scores than filing for bankruptcy. In other words, the data helps make the case for why settlement rather than bankruptcy is an excellent alternative for many cash-strapped consumers, assuming that they either settle their own debts or work with a reputable settlement firm that charges fairly for its services.

The data released by FICO and available on its web site at: http://www.myfico.com/crediteducation/questions/Credit_Problem_Comparison.aspx, shows that as a consequence of filing for bankruptcy, consumers may see as much as a 240 point drop in their FICO scores. In contrast, if they settle their debts, their FICO scores may drop by 125 points at most. Interestingly because of the way that FICO scores are calculated, when consumers have higher scores prior to either filing for bankruptcy or settling their debts, their credit scores are harmed more by settlement or bankruptcy than are the scores of consumers who had lower FICO scores to begin with. According to FICO, the reason for this difference is that the scores of lower scoring consumers already reflect their credit missteps.

Despite the FICO data, I must caution you not to base your decision about which debt relief option to pursue based on that information. All debt relief options — credit counseling, settlement and bankruptcy — will have a negative effect on your credit histories and/or FICO scores for some time. (See my recent blog, Debt Relief Options vs. Your Credit Score).

When you are deciding how to deal with your debt, your primary concerns should be gaining a clear understanding of how each option works and its pros and cons, and determining whether the numbers associated with a particular option make sense for you. For example, your first test if you are considering settlement should be whether or not you can accumulate the money you need to fund your creditors’ settlement offers before your risk of being sued by them for what you owe begins to escalate. If you cannot come up with the money you need to settle your debts relatively quickly, then bankruptcy is probably your better option.

For free help determining which debt relief option would work best for you, fill out CRN’s consultation request form.