What I learned from "Debt Control" by: Chris J. Richards:
Chris J. Richards is a guy who teaches self-help courses in financial management.
The book in question was written in 1999, and if he is a CPA it is not said in his biography. Chris J. Richards also seems to not exist on the internet. All of these are bad signs, and reasons to take this book with a grain of salt.
I thought Chris J. Richards must be a CPA because he gives so many anecdotes of people he counsiled out of debt, but they must have been people in his classes. Me thinking he was a CPA when I checked the book out from the library is probably by design, so kudos to Richards for good marketing. Unfortunately when you fool a skeptic, he tells everybody!
"Debt Control" is the second book I have read about money, mostly because I was intoxicated on Dave Ramsey, who is awesome!
In addition to all the books I'm reading I'm also listening to about 8 podcasts on money on a weekly to daily basis. So what I will emphasize in Richards' book is stuff that I have heard or read from other financial advisors. Where Richards unique, due to his lack of credentials, I will assume he is simply full of shit.
I learned 3 things from this book, I learned about debt negotiation, chapter 7 bankruptcy and chapter 13 bankruptcy. Another interesting parallel between Richards and the others is his attitude towards credit cards.
All of the authors I've been reading are of one of two opinions. The first opinion is have no credit cards. Period. Credit cards are a recipe for disaster. The other opinion is only slightly different, Credit cards may not be a recipe for disaster but they should be handled like a loaded gun, or a case of TNT, they are at least as dangerous as they are useful.
All of the financial advisors I have been reading or listening to brag about how few credit cards they have, not how many. They all brag about how they are beating the credit card companies by having no outstanding balances, not treating them like yuppie foodstamps.
The take home lesson, is "CAVEAT EMPTOR."
Caveat Emptor is latin, and was a good 'ol piece of Roman wisdom. Caveat Emptor means "buyer beware."
I carry a little green pad in my pocket where I write my plans and ideas, on the cover I have drawn a Roman coin with the face of my hero Augustus Caesar, and the words "CAVEAT EMPTOR."
Caveat Emptor has become my mantra.
Back to Richards, who has no credentials.
What did I learn from him?
1.) Debt Negotiation:
Where does our debt come from? Well we buy shit we can't afford, which is foolish. Then we don't pay it off, which is also foolish. Then what happens?
Well, what happens many times is that the lender sells our debt to a collection agency. The collection agency pays less for your debt than its worth to the lender. Often a lot less. Do you owe $1000, don't be shocked if this $1000 was bought by the collection agency for less than $100. I'm not kidding.
Then these bastards will call you, send you mail like there's no tomorrow, and threaten legal action. For the record, only the original lender can execute legal action, which will have to be a law suit. The odds of this happening are determined by your balance.
For example, aside from Student Loans I don't owe any lender over $500, which makes it highly unlikely that they will sue me, because it would cost more than $500 to take me to court. Don't get me wrong, for all of you who have bigger debts, I would have if I could have. When I was 18 I opened my first checking account, and my checks arrived like 3 months late, and I contacted the bank. They told me to put a "stop-payment" on those checks because they must have been stolen. So I put a stop-payment on them, which makes writing any of them illegal. But I didn't know that, so when my checks arrived I started writing them, they all bounced.
I was able to dig myself out of this problem with help from the D.A.s office, but no one would give me an unsecured credit card, I could probably get one now, but I am in the "credit cards are evil" camp. If I had had an unsecured credit card I would have treated it like free money, and probably bought assault rifles (but thats another story).
So the collection agencies cannot sue you, they all have a lawyer on retainer that can send you scary threats on legal stationary, but they are all bark unless it is the original lender's attorney contacting you. In which case you should brace yourself for a nightmare.
What are the odds of a collection agency collecting a debt which is a year old or older?
Now read carefully --> 25%
Do you understand what that means?
It means that for every $1000 owed of the debt they have purchased they can only reasonably expect to collect $250. They know this, this is why your debt was bought so cheaply.
Now the way this usually averages out is that only a few people ever pay anything, but if you pay your full debt to a collection agency you are a sucker.
Your credit report has already been tarnished just by being delinquent so long, so the idea now is not to pay it in full, but to settle in full.
Now that may look like it says the same thing, but it doesn't.
Compare : "Pay in full" vs. "Settle in full"
Welcome to the wonderful world of "legalese" a language which makes it impossible for any American to have snowball's chance of representing themselves in court.
Pay in full means you pay all the money you borrowed plus interest.
Settle in full means you pay what you were able to talk the collection agency down to.
Both of these outcomes look equally good (or bad) on your credit report.
What that means is you want to "Settle in full."
How do you do this?
First you have to be polite, and patient.
Both of these virtues are hard for me, I am a 29 year old ex-punk rocker, one of my favorite things to do is make eye contact at about 2 inches from someone and say "fuck you!" You cannot have this attitude when your goal is to "settle in full."
I listen to a podcast on manners which helps me not act like a visigoth, it can be found at :
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If you think I'm kidding, I'm not. In this case manners will get your debt significantly reduced, if you are a bit rough around the edges like I am, you need to learn them anyways.
You will get told no, sometimes extremely rudely, then you have to patiently ask for a supervisor. When the person on the other end of the phone is rude to you, you cannot be rude back.
In this case your rudeness is a way to prevent a successful negotiation, which is failure, which is self-destruction. Its a little like having to weasel your way out of a fight with a professional fighter, you don't walk away unscathed by punching them in the face. Collection agencies are a syndicate of bullies, and if you speak foolishly you will hurt only yourself.
Climbing the ladders of supervisors may take days, or even weeks. Once you start going more than two rungs in the ladder you will have to do this during office hours, and often by appointment.
But when you do get through, you need to have a number ready.
They already know that they can only expect to get 25% of the amount you owe, so what you do is take the amount you owe, for example: $1000
Multiply it by .25
And that will give you 25%
$1000 X .25 = $250
$100 x .25 = $25
$1x .25 =$ 0.25
Your debt won't be a nice multiple of 10 most likely, but you get the idea.
Now don't tell them that you know they can only expect 25%, that would be breaking the manners rule. They will feel antagonized and will fuck you up. If nothing else just by not negotiating.
Sun Tzu wrote in his book "The Art of War" that "When you are strong your enemy must think you are weak, when you are weak your enemy must think you are strong. The art of war is deception."
Meaning, act ignorant.
Act like a poor orphan trying to throw itself at the mercy of the benevolent debt collector. But keep negotiating until you get reasonably close to that 25%. You will cut down your delinquent debt this way.
So this was a little longer than I expect, hence I will write about Chapter 7, and Chapter 13 bankruptcy in the future.
Your life is a love story!