ZipDebt Debt Relief

Fast Affordable Debt Relief

Charles Phelan

R.I.P. Delpha Renard, 1944-2012

by

It is with a deep sense of loss that I must inform clients, former co-workers, and the general public of the passing on September 5, 2012, of my long-time colleague and good friend, Ms. Delpha Renard. She died peacefully after a protracted battle with lung cancer. Delpha fought valiantly for about 18 months after the initial diagnosis, and toughed her way through multiple rounds of radiation treatment and chemotherapy, doctor visits too numerous to count, needle biopsies, CT scans, and the debilitating symptoms associated with advanced lung cancer.

I will greatly miss my old friend Delpha, but I do take comfort from knowing that her pain and suffering are at an end, and that she is at peace now. I would like to thank the wonderful staff at Sharp Grossmont Hospital and Cottonwood Canyon Healthcare Center for taking great care of Delpha during her final days. It’s never easy to watch a good friend decline before your eyes and pass away, but the doctors and nurses at these medical centers made sure that Delpha had the necessary comfort care.

For those of you who didn’t know Ms. Delpha Renard, she was a “character,” to say the least. A bit eccentric (by her own admission), Delpha was by turns witty, smart, funny, tough as nails on the outside, and a great big sentimental softie on the inside. She was also extremely knowledgeable in many areas and had accumulated an amazing amount of experience over her long and eventful life, experience that she generously and happily shared with those clients who had the privilege of working with her over the years.

Delpha was certainly no stranger to struggle, loss, and tragedy, but through it all she remained tough, sassy, independent, unbowed, and – just plain prickly. 🙂 Just ask any of the debt collectors she dealt with during her stint as a professional debt negotiator, or the many clients for whom she provided that much-needed “tough love” to get them going on resolving their debt problems.

Time and again, I would direct anxious clients to Delpha for assistance, and by the end of the conversation, they would always be laughing and joking like old friends. She had that knack, that intangible “something” that people instantly recognized. She was a genuine human being with a heart of gold, and she really cared about the people she was trying to help.

Delpha also loved animals with a deep passion, and one of her main concerns during her illness was to ensure proper care for her two dogs, cat, and four birds. Thankfully, all of her beloved pets were quickly placed with good loving homes, and they are all doing fine now. Near the end, once it became clear that she was no longer in a position to care for them herself anymore, I’m sure that Delpha took great comfort from knowing her pets would still be fine.

Delpha is survived by two brothers, as well as her siblings’ several children. The family has requested that in lieu of flowers, anyone wishing to express condolences please consider contributing an equivalent value to the non-profit organization headed by the wonderful loving neighbor who provided daily assistance, comfort, and care to Delpha during her final months. Donations will be gratefully accepted at the following address:

Birth Parent Association
529 Hart Drive, Unit #7
El Cajon, CA 92021

Thank you, Delpha, for being such a loyal friend all these years. May you now have the peace and rest that you deserve.

DIY Debt Settlement Myth #8: A Debt Settlement Law Firm Will Get The Best Results

by

This is the eighth in a series of posts discussing the most common myths about do-it-yourself debt settlement. When consumers first hear about the debt settlement strategy, one of the first questions they usually ask is: “What happens if I get sued?” In post #5 in this series, I discussed the fact that many traditional debt relief companies try to create the impression that consumers will have lower risk of legal action if they enroll with their program, when the truth is that they a actually increase the legal risk to their clients.

In this post, I’ll focus instead on the so-called “attorney model” for debt settlement, where the company itself is a firm headed by attorneys. We’re talking about an actual law firm, with bar-licensed attorneys owning the company, as opposed to non-legal debt relief companies that may have an attorney on retainer to help with client lawsuit activity.

The theory behind the attorney-model is that creditors will be far less inclined to litigate their claims if they know that you already have an opposing attorney on your side. So when a prospective client asks the question – “What happens if I get sued?” – the sales rep’s answer is: “Once your creditors realize you have a lawyer on your side, they will be far less likely to sue you.”

Here again, there simply is no truth to this sales claim. There is no evidence whatsoever that using one of these companies lowers the risk of legal action, and plenty of evidence to the contrary. A few minutes on Google is sufficient to turn up numerous consumer complaints about so-called “attorney model” debt settlement firms, where an individual enrolled in one of these programs thinking it was a safer way to go, only to see swift legal action anyway – usually followed by total inaction on the part of the company they had already paid huge fees to.

Also, you would think that a law firm would provide actual legal representation in court in the event a lawsuit is filed against one of their clients. This is another common sales claim, “We’re a law firm, so we will take care of any lawsuits that might happen during the program, and we will defend you if it comes to that.”

The reality is that most of the attorney-led debt relief firms have specific language in their contracts stating that legal representation in the event of litigation is not included in the basic contract. Often, there is a separate schedule of extra fees that must be paid by the consumer before any actual legal services would be rendered.

When the FTC banned advance fees in 2010, some attorneys saw an opportunity to carve out a loophole and continue charging upfront. Attorneys are generally permitted to charge in advance of rendering service, so the theory was that such firms would be exempt from the FTC ruling. Leaving aside the fact that there is no exemption under the FTC rule for attorneys who practice debt settlement as their primary business activity, it’s easy to see that the whole “attorney-model” concept was just a cover to continue gouging consumers. These companies have some of the highest fees in the industry, with upfront fees of 25-30% of the enrolled debt being common. There is no possible way that such a fee structure can work to the consumer’s advantage. Hence the numerous complaints we’re seeing against such companies, with lawsuit after lawsuit being filed against them by Attorneys General from numerous states. As a result of such intense regulatory pressure, one of the largest attorney-model companies has recently announced that they are no longer taking on new clients. Hopefully, it’s only a matter of time before most of the other toxic firms exit the industry as well.

Myth busted. Attorney-model debt settlement firms are no better at preventing lawsuits than any other type of debt company, and given the huge front-loaded fees involved, consumers are literally paying good money to increase the risk of litigation and program failure. The key to avoiding lawsuits is to settle your debts quickly, before the legal fireworks begin.

DIY Debt Settlement Myth #7: A Debt Settlement Program Will Stop the Collection Bombardment

by

This is the seventh in a series of posts discussing the most common myths about do-it-yourself debt settlement. It’s common knowledge that your phone is going to start ringing off the hook the moment you begin missing payments on your credit card accounts. Virtually all major creditors have automated dialing systems that are triggered off the lack of a payment being recorded by the due-date, and the bombardment can be truly unbelievable. Some creditors program their systems to call you dozens of times per day, in an attempt to get you on the phone and wear you down until you make a payment (whether or not you actually have the funds to do so).

One of the chief reasons people hire debt settlement companies is because they don’t want to deal with this bombardment of collection phone calls and they believe enrollment in a company program will put a stop to it. However, as I’ve written in other posts in this series, the banks do not recognize any need for debt settlement companies to exist in the first place. So there is no formal program that provides any sort of protection against the normal collection process utilized by creditors. Any debt settlement organization that promises you will not receive any collection calls while in their program is actually in violation of FTC rules for key disclosures required by such firms, one of which is to make it clear they can’t stop the calls.

There is only one way that a debt company can get your phone to stop ringing. They can send a “cease & desist” notice to your creditors, along with the Power-of-Attorney you granted them to handle your case. Yes, this will usually get your phone to stop ringing off the hook, since most banks will respect a firm request to cease communication via telephone. However, nowadays this is equivalent to waving a red flag in front of a charging bull. I’ve seen numerous situations where an account that could have been settled for 25-30% instead went quickly to lawsuit status (hello 80%!) after receipt of a cease communication notice. Once a creditor gets the idea you will not communicate with them, why should they go easy on you? What choice have you left them but to pursue a legal remedy against you instead?

Don’t make a tough situation worse by using obsolete and dangerous tactics that will only backfire on you. It’s a very simple matter to manage the collection barrage using call screening techniques that you can easily learn from a good coach. There is no magic to it, just one or two tricks of the trade. You establish a dedicated number for this purpose, and then proactively manage the frequency of contact you have with your various creditors. It’s not difficult at all to get the phone to quiet down so you can go on living your life and working through this process with a minimum of stress and worry. It is totally unnecessary to pay someone else to stop the phone from ringing, especially when the only tactic they can use will greatly increase your risk of litigation.

Myth busted. Under FTC rules, debt settlement companies must disclose that they cannot stop collection calls, and there is no viable method of stopping the collection process that doesn’t increase risk of litigation. Consumers can easily manage the collection process on their own by using simple call screening techniques, combined with proactive communication with their creditors.

DIY Debt Settlement Myth #6: It’s Safe To Take 36-48 Months To Settle My Debts

by

This is the sixth in a series of posts discussing the most common myths about do-it-yourself debt settlement. Most traditional debt settlement firms are still quoting program durations of 36-48 months, sometimes longer, and clients are led to believe that it’s safe to take that long. By “safe,” I mean a low risk of lawsuit activity. After all, multiple lawsuits will tend to push a client into bankruptcy and therefore defeat the original purpose of using the debt settlement approach.

To begin with, let’s make the obvious point that it makes little sense to avoid a 3-5 year Chapter 13 bankruptcy when you’ll be fully exposed to collection activity (including potential litigation) for 3-4 years in a debt settlement program. In bankruptcy, your creditors cannot sue you to recover. That is not the case with debt settlement. The longer a debt settlement program lasts, the greater the likelihood the client will see one or more lawsuits before the program is completed.

Sales reps still quote 36-48 month durations (or longer!) because it provides the illusion of relief to the client. “You mean I can pay $600/month for 36 months and everything will be handled?” That’s the pitch anyway. The reality is that enrollment into such a program does NOTHING to stop the in-progress collection efforts by the creditors. Once an account rolls past charge-off after 6 months of delinquency, the risk of litigation becomes higher and higher as time goes by. In my experience, lawsuit risk climbs to an unacceptable level when you push too far past the initial 12-month period after default. Prior to that, there is still risk, but it’s usually lower risk and much more manageable.

Here at ZipDebt, our clients settle most of their debts before charge-off, and the remaining accounts are usually resolved within a total program duration of 12 months. Why are we so much more successful at expediting this process vs. the folks quoting 36 month programs? Simple. We are not focused on “making the sale” by presenting an option that is simply not effective on the long run. We prefer to push our clients to “go find the money” to settle quickly, and that is precisely what most of them do once they understand how the math works! We get our clients to start thinking in terms of the ASSETS they still have left to work with, and converting those assets to cash, instead of relying exclusively on the client’s monthly budget the way most companies do. We aim for fast relief instead of slow torture!

Our results speak for themselves. It’s very difficult to find published data on litigation rates by any of the prominent debt settlement firms. The incidence of lawsuit activity is something they really don’t want to be common knowledge among consumers. When you can find such data, however, you’ll see that clients enrolled in traditional 3-4-year debt settlement programs routinely experience legal action. It’s almost impossible to take 3-4 years to settle your debts without seeing one or more lawsuits. By comparison, for the 2.5 year period of 2010-2011-2012 (to date), ZipDebt clients have reported 2,251 credit card account settlements. Out of those 2,251 settlements, only 41 were reported as having reached the status of a lawsuit, less than a 2% incidence rate. A rather glaring difference!

Myth busted. 36-month debt settlement programs are long obsolete, and lawsuit risk climbs to near certainty on one or more accounts during the second & third year of default. Fast-track debt settlement, where the debts are all settled inside of 12 months, is a far superior approach, with a lawsuit risk of approximately 2% per account.

DIY Debt Settlement Myth #5: I’ll Be Protected Against Lawsuits If I Enroll With A Debt Settlement Company

by

This is the fifth in a series of posts discussing the most common myths about do-it-yourself debt settlement. As consumers shop for a debt relief solution and talk with the sales reps at various debt settlement firms, one of the first questions they will usually ask is, “What about creditor lawsuits? Won’t they just sue me to recover what I owe?”

There’s no question that taking the path of private debt negotiation carries some risk of legal action. In general, the longer you take to settle your delinquent accounts, the greater the risk being sued meanwhile. (This is a key reason why we always encourage our clients to negotiate all their settlements as quickly as possible.)

However, the responses you get will vary depending on how ethical the company is in terms of key disclosures. Sales reps for debt settlement firms are always trying to find creative ways to deal with this key objection, so they can “close the sale.” Before the FTC stepped in and amended the Telemarketing Sales Rule to restrict debt settlement companies from misrepresenting their services, we used to hear a lot of outright falsehoods, such as, “They can’t sue you while you’re in our program,” or, “Don’t worry, we won’t let that happen to you.”

[NOTE: For the purpose of this article, I am ignoring the so-called “attorney model” debt settlement firms, where supposedly an attorney is assigned to monitor your file and help with any legal situations. I will discuss attorney-based companies separately in a later post in this series.]

Nowadays, after the rule change and a series of enforcement actions, we hear less of this blatant lying than before. However, sales reps working for traditional debt settlement companies still tend to downplay the risk of legal action. Further, many of the companies that generate “leads” for the debt settlement industry use mailers or online ads that give the impression that consumers are “applying” for enrollment in a formal program, either a government sponsored program or one the banks fully recognize.

Without actually saying so in plain English, these companies are trying to create the impression that a consumer who enrolls with their program will somehow be protected from aggressive collection practices. Yet time and time again, we hear consumer complaints along these lines: “I signed up with this company to settle my debts for me. One of my creditors sued and they did nothing about it. Now I have a judgment against me and had to file bankruptcy anyway, but the debt company refused to refund my money.”

There are two reasons why consumers frequently get sued by their creditors even when enrolled in a traditional debt settlement program. First, as I discussed in the previous post in this series, the banks do not actually recognize the need for third-party debt settlement. We have testimony to that effect by bank representatives during the FTC hearings on the industry. So there is no formal enrollment taking place, and therefore no procedure that will cause the bank to suspend its normal collection activity, which may include litigation.

Second, and perhaps more importantly, involvement with a debt settlement company can actually INCREASE the risk for legal action. I refer to this as the “footprint” problem of debt settlement. A negotiator cannot talk to your creditors on your behalf unless you first grant them a Power-of-Attorney. Yet once that Power-of-Attorney is received by the creditor, the account is flagged as a third-party settlement account, and the normal collection process is short-circuited. Rather than helping, the negotiator’s involvement actually hurts the consumer by accelerating the placement of their accounts to legal status, when otherwise it might have not happened (or taken much longer to develop).

Myth busted. As demonstrated by numerous complaints filed by consumers, as well as many enforcement actions by the FTC and Attorneys General for various states, enrollment in a debt settlement program does NOTHING to decrease the risk of litigation faced by consumers who are delinquent on their credit card debts. In fact, due to the “footprint” problem of debt settlement, the involvement of a debt settlement firm may actually INCREASE the risk of lawsuits and also accelerate the timeframe in which they occur.

DIY Debt Settlement Myth #4: Settlement Companies Get Better Deals Because They Have Relationships With Creditors

by

This is the fourth in a series of posts discussing the most common myths about do-it-yourself debt settlement. The claim that debt settlement companies have relationships with the major creditors is a major part of the sales presentation for traditional settlement programs. I call this the “volume” objection, and of course, it’s total nonsense.

The pitch goes something like this: “We are a big company and every day we settle large blocks of debt. The creditors know us and work with us and we do bulk settlements with them, so we can get you a better result than you’ll be able to negotiate on your own.” The picture created in the client’s mind is that they are enrolling in a formal program – a program that is RECOGNIZED and PERMITTED by their creditors, similar to a non-profit credit counseling program (aka “debt management plans”).

Unfortunately, this sales claim is totally bogus! The major credit card banks lobbied heavily to get the entire debt settlement industry shut down, and the draconian ruling by the FTC in October 2010 has gone a long way to accomplishing that aim. During the hearings that led to the FTC ruling, we heard directly from the banking industry that they did not view the debt settlement industry favorably, and that they do not recognize the need for such firms. At best, the relationship is an adversarial one, and the banks still view any intervention by a for-profit service as being against their own interests. In the context of the major bank creditors, the notion of “bulk settlements” is just a fairy tale made up by the settlement company’s marketing department.

What about collection agencies or collection attorney firms? Here, there is some truth to the statement that a debt settlement company may have relationships with other third-party entities like agencies or attorneys. However, that does not necessarily result in a lower overall percentage on negotiated settlements. And even if there was a better discount available through such connections, any savings would be more than gobbled up by the fees involved. For example, let’s say the best you can do with an agency yourself is 40% of a $5,000 balance, or $2,000 net payout. The settlement company negotiates it down to 30% instead, or $1,500 payment to the creditor. The fee, however, is 25% of the $3,500 savings, or $875, so the total payout is $2,375. Better deal, worse result! You would still have been better off handling the matter yourself.

Myth busted. Even the largest debt settlement firms have zero influence over the settlement parameters of the major credit card banks, and “bulk settlements” are just so much marketing hype. Even if there were deeper discounts available through professional negotiation, any savings gain would be more than offset by fees. Consumers save more overall by excluding the fees and negotiating on their own.