A) It depends on several factors, however in general it is not advisable, unless you are the “do it yourselfer”, type of person. Meaning you would build your own home, prepare your own taxes. Most attorneys’ and other professionals concur that if you represent yourself, “You have a fool for a client”, regardless of your personal ability to resolve the situation on your own the school of thought is that you are too personally, involved. Example, three brothers were found joint and several liable on a business deal that went atrocious. The judgment creditor through counsel obtained the judgment. One of the debtors happened to be an attorney. He went to court to have himself removed from the debt, have it vacated, filed several motions to no avail all denied. It was not until the Attorney engaged another attorney that he received any beneficial result; however he did not fight for his brother the bad actor and only fought for his own personal relief which was granted only through hiring counsel. Exonerating, himself, yet did nothing to dispute the validity of the brother’s obligation to pay. There are few lessons in the above real life case example.

Q) How do I get a creditor off my back?

A) Pay them in full, file for Bankruptcy or arrange a settlement through competent professionals that have the knowledge and experience to handle it and are not just winging it, beware of free services or those that make empty promises. Be skeptical if someone offers to help you for free as there may be a hidden agenda. After all, why would any business be so benevolent? In the immortal words of one of my favorite economist’s, Milton Friedman, “There is no such thing as a free lunch.”

If they call you too much or inappropriately that is actionable, however even cease and desist letters do no stop nor prevent them from contacting you if the debt is legitimate. If it is your intention to settle with them and you have communicated that you are being represented by an Attorney that should force them to adhere to higher standard when communicating with you. You may also utilize a DAAN module, which hooks into your phone and tracks the calls in the internal chip, as well as provides forwarding, recorded messages, and may be used to minimize disturbances from collection attempts from creditors.

The internal chip in the DAAN module, creates a log as previously stated, “If they call you too early, too much or too late, that is actionable.”  

A) The higher the score the better it is throughout the agencies, TransUnion, Experian, Equifax. There are different types of scoring models depending upon the asset you are trying to purchase, such as Beacon scores are specific to the auto industry, while FICO scores are used predominantly in applying for real-estate.  Having a good score versus an excellent score does often make the difference of thousands of dollars in the ultimate purchasing price. Your credit score today may have less of an impact on your buying power as your DTI, Debt to income ratio which will ultimately, determine raw buying power as more and more americans are finding themselves struggling and overwhelmed, yet still make minimum payments and have high scores yet no prudent lender would make a loan with out collateral. That combined with more and more Creditor regulation and consumer protection. Significant cash and equity in the transaction changes the requirements, regardless of how good or bad your credit score is, this is what’s known as a compensating factor. The old adage cash is king, credit is Queen does often apply, here. Example, 20% down on a real-estate transaction will qualify you to avoid making additional payments (PMI), principal mortgage insurance, which would be a compensating factor to less than excellent credit. Business credit worthiness is measured quite differently than individual personal and most often Dunn & Brad Street is the reporting agency of choice for small business credit worthiness evaluation.

So it will depend for individuals on how you answer the following questions:

1) Are you in the house you and your family chose?

2) Are you driving the car you want to be driving?

3) Do you intend on using credit to make major purchases in the near future; three year time horizon?

For a business the questions would be:

1) Are you in the space you need and want to grow your business effectively?

2) Are you able to obtain the necessary supplies you need to conduct your business?

3) Do you have plans for expansion that would involve an evaluation of your businesses credit worthiness?

Often a small business’s obligations are joint and several with personal liability falling on the owners, however good or bad personal credit does not necessarily dictate good or bad business credit, especially with a corporation which is a separate entity.

Depending upon what stage of life you are in your needs may be quite different. Example, the student that obtains a 500-1000 card at the book store with a freebie as incentive to sign up, is just entering the credit world as opposed to the retiree that has bought a house, drives the car they desire and may be financially overwhelmed and is just looking to hold onto what they have. The goals of the two preceding examples are going to be very different, so there is no magic pill generic prescription for everyone.

Q) What proactive methods are available to reduce my debt?

A) Accelerating your payments will reduce your obligation according to the clauses in your loan, e.g. simple interest, compounding frequency, prepayment penalty if any. When considering accelerating payments request an amortization schedule reflecting your adjusted, anticipated payment amount and frequency. Conversely, not adhering to the terms, because of a valid reason such a documentable financial hardship may be the basis for a successful negotiation of a mortgage loan modification, do you want an assigned government HUD attorney to give you 1)what you get, 2)when you get it,3) if you get it; we here at Two Bridge Debt Resolutions think not. If you have the resources to obtain the best competent private sector professionals, you should, and often through our strategic analysis of your entire financial situation involving an evaluation of credit, debt, hardships, and perhaps through prudent budgeting and other methodologies we can increase your discretionary cash flow freeing up much needed funds for the long term.

 Q) My interest payments have ballooned subsequent to me being induced to balance transfer based on a teaser rate, is my only recourse Bankruptcy?

A)Depending upon your eligibility for a ch.7, would dictate the appropriate response to the intended question. However, I do not see any correlation between high interest rates and unfair predatory lending practices and a consumer’s reaction to declare bankruptcy. It reminds me of the old adage, “Why cut off your nose to spite your face”, as you will not be inflicting any pain on your creditors unless the debt is forgiven under a ch.7 but they will simply write it off as a loss and you are the one stuck with the negative stigma for the next 7 years. If you have an income and a method to pay some of your obligations the courts will force you to do just that in what is referred to as ch.13. The school of thought advocating proactive measures enables our clients to avoid being “minorated”, a play on words, meaning the opposite of being emancipated. Minors (under 18) may go to a judge expressing and proving there ability to handle their financial obligations and otherwise conduct themselves as adults, may be granted emancipated minor status. The opposite is true for those that put themselves on the mercy of the courts through bankruptcy proceedings, essentially asking the court to treat them as children, because of their inability to handle their financial affairs. The opinions expressed above are of the author.

Q) Who is a good credit repair organization?

A) Hard to say as they all seem to accept significant contributions from credit organizations and set-up not for profits. Between the lobbying, legislation and incestuous ownership, excercise extreme caution when accepting credit counseling as this also reflects negatively on your credit score, appearing as third party assistance.

About the Author:

 Mr. Abraham Brad Cozzi, has over 15 years of professional experience in the compensation and benefits arena. He currently specializes in debt management, foreclosure prevention and loss mitigation professional services within the organizational environment; 

 Abraham Brad Cozzi, 
  http://www.linkedin.com/in/2bridgedebtresolutions www.debtmaster.wordpress.com

“The pen is mightier than the sword”, Robert Buluer-Lytton, 1st Earl of Lytton, pen name of Owen Meredith

Let’s take an example of a two income household in the state of Illinois; we will fictitiously call them the Jones.  The Jones’s are experiencing the hardship of one lost income, combined with the additional difficulties that higher minimum payments and interest rates are en vogue with the creditors, such as Chase see Consumer affairs article “Chase raises minimum on credit cards” http://www.consumeraffairs.com/news04/2009/06/chase_payment.html.

In the above example we will assume that the ongoing stable income is: $62,500 and the lost income was: $48,500. The household’s total income was once 111,000, but now with unemployment paying out a maximum of 25,550 is reduced to 88,050 about a 20% drop in the household’s total income. See, “Maximum weekly unemployment benefits by state” By The Associated Press Thursday, November 20, 2008 Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/11/20/national/a140117S46.DTL#ixzz0OSeUv9KH

Now the Jones’s have credit card debt that totals $28,750 and their minimum payments were $575 or 2% of the outstanding balance. However, because some of their creditors have increased their minimum payments to as much as 5% of their outstanding balance on their accounts the new minimum payment is: $1,006.25 or (3.5 % an average of all of their accounts minimum payments).

Now with one of the Jones’s on unemployment at a significantly reduced income the creditors are threatening to close accounts or raise interest rates. Moreover, the Jones’s want to avoid the balance transfer traps that got them into this precarious position in the first place. They are considering the following alternatives: Bankruptcy chapter 13, Home Equity loan, Debt consolidation loan and Debt settlement-negotiation. The Bankruptcy will stay on their credit for 7 years and they will be forced to make a payment schedule with their creditors, that if they miss any payments at all that are due under their Plan, their case will be dismissed by the Court, so they want to avoid that. The home equity loan will change the nature of their debt from unsecured to secured, so now if they default on their credit cards they risk losing their home so they rule out that option. The consolidation loan and debt settlement-negotiation are the last two options. The Jones’s are unfortunately not eligible for a favorable rate and or terms if they qualify at all for a consolidation loan because of their diminished credit score as they have been 30 days late on a few of their open revolving accounts and their once stellar credit score has now dropped below 600. So that leaves them with the Debt Settlement-negotiation method as their best alternative to getting out of this mess. Here’s how it will work for them, the $28,750 of total unsecured debt will be enrolled into the debt settlement program and will settle for approximately 65% of their current balances or $18,687.50. The Jones’s will be debt free in approximately 36 months by making escrow deposits into a settlement account that they have complete control over at a scheduled contribution of $519.01 (including service fees to the debt settlement company), that facilitates the negotiations and settlements for the Jones’s final approval, coincidentally about the same as they were paying prior to the creditors making egregious unilateral changes. The total amount of scheduled contributions inclusive of service provider fees is $18,687.50. They have the flexibility to accelerate or miss a month, and they realize that their creditors are not being paid on a monthly basis, because it is their intent to negotiate a more favorable financial outcome for themselves. Their creditors are advised that they are being represented and that they will receive cease and desist letters requesting them to direct all future contact to the attorneys that will be working on their behalf to resolve these matters. They may continue to call but they are on notice that any breach in the fair debt collection act will be noted in a log that the Jones’s will be keeping and that they may be entitled to restitution for and such breach. The Jones’s intend to enroll in a credit restoration program to ensure that their credit score is maximized, now that their debt to income ratio is significantly improved after the 3 year program’s completion.

So in summary, the Jones’s monthly discretionary income went up by almost $500, the difference between their total minimum payments of: $1,006.25 to the creditors and there scheduled contribution of $519.01, saving them $487.24 every month. Now if the unemployed member of the Jones’s household should find suitable employment with pay commensurate,  the good news for them is there are no pre-payment penalties and they could of course accelerate there contributions and be debt free faster.

 They are certain that there is light at the end of the tunnel and they are well on there way to being foot loose and fancy free, debt free! Unless, the other member of the house lost there job and they both were not working it may be off to the bankruptcy courts.

About the Author:

Mr. Abraham Brad Cozzi, has over 15 years of professional experience in the employee benefits arena. He currently specializes in Debt management, foreclosure prevention and loss mitigation professional services within the employee benefits arena; with his new joint venture, Two Bridge Debt Resolutions, located in the Two Bridge district of New York City, and may be reached at (646) 839-8524 or twobridgedebtresolutions@GMAIL.COM

* All figures on this page are examples only. Rates, payments and settlement amounts vary, and are subject to change.