Do NOT Avoid Bankruptcy – Podcast

There is so much misinformation floating about when it comes to dealing with debt. Far too many people tell you bankruptcy is a last resort or you should avoid bankruptcy. But here is the ironic thing, that is often the worst advice possible.

In this podcast, Damon Day and I talk about bankruptcy, myths and assumptions about bankruptcy, and how to deal with the debt collector if you fall behind on payments.

The big lesson here is not to believe everything you think but to do your homework and find out what the facts are so you can make the best decision for yourself or a friend that is facing money troubles.

Transcript

Steve Rhode: [00:00:00] You have something that’s not cliquey or twisty or something that you can play with. That’s soft.
[00:00:05]Okay. Tape measure.
[00:00:08]not gonna work
[00:00:09]All right. Are you ready?

[00:00:10] Damon Day: [00:00:10] Oh, I got Roxy’s Kong ball. I can play with it.

[00:00:14] Steve Rhode: [00:00:14] That’ll work. Thank God. Okay.

[00:00:16] Damon Day: [00:00:16] But if I shake this around, look at you. See her; she’s coming. Look at her. Yeah. It’s like daddy. That’s mine. Daddy. That’s mine. Daddy. All
[00:00:24] rock and roll. Cause I do have to drop some kids off at the pool.

[00:00:27]Steve Rhode: [00:00:27] Hey, you’re back listening to the, get out debt guy show with Steve Rhode, myself, and Damon Day. And today, we’re going to be talking about why bankruptcy is the last resort. Or is it, you know, Damon, one of the things that drive me crazy is I see all these websites, and I hear the personal finance pundits out there that say bankruptcy is the last resort.
[00:00:52]But the reality is I don’t think you could use that as a standard or say that’s universally true. What do you think?

[00:01:00]Damon Day: [00:01:00] Oh, I think.
[00:01:01] it’s common wisdom out there that it’s universally true. Everybody talks about you have to do this to avoid bankruptcy or do this to avoid bankruptcy or do this. Everything is designed around avoiding bankruptcy, right? All of these debt relief programs are to avoid bankruptcy.

[00:01:17]Steve Rhode: [00:01:17] So Damon, one of the things that I find is that people don’t consider it while they’re scared and afraid about bankruptcy. And I went bankrupt in the late eighties or early nineties. And I will admit that it felt scary and shameful and everything else, but it felt that way because I didn’t understand what reality really was.
[00:01:40] And the reality was that. Unless I could deal with my debt, and at that time, it was impossible for me to pay anything and what I contacted my creditors, they wouldn’t even accept partial payments. And I needed a solution to move forward because either I was going to be stuck not able to meet any obligations, or I was going to file bankruptcy.
[00:02:06] Get the advantage of legal protection. That’s afforded to me under the law and allows me to regroup and do better moving forward. And so some of the things that I hear, Damon, tell me your response to this. Okay. If I file bankruptcy, I’ll never get credit again. True or false.

[00:02:26]Damon Day: [00:02:26] That is false.
[00:02:27] And you may be surprised how fast credit card and new car loan offers to show up in your mail sometimes before you even get the official discharge

[00:02:37] Steve Rhode: [00:02:37] Now, why would a creditor do that? People think that creditors would never extend credit to you again. They’re in the credit business. Sometimes somebody who has filed bankruptcy is a better risk for a credit group because they will charge them a higher interest rate.
[00:02:51] And they’re not going to be able to file a chapter seven again for a number of years. And so, let’s take the risk.

[00:02:58]Damon Day: [00:02:58] When you are fresh off of bankruptcy, you’re going to be hypersensitive about making sure all of your bills get paid on time, moving forward, because you’re trying to get past that point.
[00:03:07] And you get a fresh start. So you’re not going to be an hour late on your payments, much less a month.

[00:03:15] Steve: [00:03:15] Yeah. Bankruptcy, I find for many people, is a teachable moment. And sometimes, actually, I would say most of the time, the causes of bankruptcy are things that are beyond your control job layoff. Pandemic, for example, accident, illness, injury, divorce, and all of a sudden, you get a financial surprise, and you start just rolling down a hill.
[00:03:41] Here’s another myth that I hear all the time. Damon, I hear bankruptcy will ruin my credit forever. True or false.

[00:03:49]Damon Day: [00:03:49] That’s false. In fact, oftentimes, you’ll be surprised within a few months after the bankruptcy; your score is actually higher than it was prior to filing the bankruptcy because now you don’t know all the money anymore.

[00:04:02]Steve: [00:04:02] I have that debt that was dragging you down, and you don’t have that horrible debt to income ratio that was sucking you under. Here’s another myth, Damon. I hear that. If I file bankruptcy, I’ll never be able to rent an apartment again.

[00:04:16]Damon Day: [00:04:16] That would be false. And my response to that is. Millions of people had filed bankruptcy, but there are not millions of homeless people out there simply because they filed bankruptcy. You’ll be able to rent places again. I’ve filed for bankruptcy at 2011 end of 2011. And I’ve rented several places since then and have not had a problem.
[00:04:38] Could it cause a problem sometimes? Yeah. But to get to the point where you say, I’m never going to be able to get a place, that’s just not right.

[00:04:43]Steve Rhode: [00:04:43] so another thing. People are so worried about fixing their financial past that they don’t consider their financial future. What are you playing with there?

[00:04:55]Damon Day: [00:04:55] Dammit. I was doing it slowly. It helps my mind relax.

[00:04:59] Steve Rhode: [00:04:59] get something soft to squish or play with or something.

[00:05:03] Damon Day: [00:05:03] And then I was holding it like way out, like then just slowly doing it. Damn it. Okay. I got caught.

[00:05:11] Steve Rhode: [00:05:11] All right, so people want to repair the past, but they don’t consider the future. So if you are in your twenties, thirties, forties, or even your early fifties, and you spend the next five years trying to dig yourself out of a jam. That’s darn near impossible. You are sacrificing saving for retirement.
[00:05:33] And those years that you could be putting money in and letting it grow for retirement can cost you hundreds of thousands of dollars in savings when you’ll need it most. When. Old can’t work and broke. And so constantly focusing on the pain, looking backward, thinking the debt collector is making decisions about you about who you are, your self-worth, and all that other stuff is a mistake. It’s a pain point to get you to pay because that is what the debt collector wants you to do. That doesn’t necessarily mean that’s what’s best for you to do. Okay.

[00:06:13] Damon Day: [00:06:13] Okay.
[00:06:13]Sorry, I’m just Steve’s camera took a tumble on. So I’m watching this on the screen.

[00:06:18] Steve Rhode: [00:06:19] I did catch it.

[00:06:20] Damon Day: [00:06:20] it, you did. I was like, what’s going on here? I always tell my clients bankruptcy is just an option; it’s just like any other option. So it.
[00:06:30] It never hurts to just get all the information because sometimes there are excellent reasons.
[00:06:36] To avoid bankruptcy at all costs. And then sometimes there are excellent reasons to run as fast as you can—the bankruptcy. So everything is just very dependent on the client’s situation. There are never any absolutes where it’s like this option is always better than bankruptcy, or this option is always better.
[00:06:54] So it’s always best to look at all the options, look at all the different strategies, figure out what your goals are, where you’re at in your life, what you’re trying to do. And then just look at bankruptcy. Like you would look at any other potential options before you pass judgment on filing or not filing.
[00:07:11] Most of the people that call them. We’ll always say, well, I want to avoid bankruptcy, right? And again, I’m not a bankruptcy attorney. I’m not here to push you away or towards bankruptcy. My job is to help you find the right answer. But oftentimes, I’ll always just respond to that with why don’t you want to file bankruptcy?
[00:07:27] And most of the time, they don’t have an answer for that. They just don’t want to, so we’ll work through it. And then sometimes it’s. Oh, Okay. Yeah, I will. I should file bankruptcy. And then other times it’s oh that’s why I would potentially use my house. I’m not going to file. So the bottom line is, and I’m rambling.
[00:07:44] I can see Steve looking at me; just get all the freaking options first, then make a decision. It’s that simple?

[00:07:50] Steve Rhode: [00:07:50] We here’s one thing I hear I’ve heard for decades now is I have a moral obligation to repay my creditors. So I can’t file bankruptcy, to which I say. Just because you file, bankruptcy doesn’t mean that you can’t repay your creditors. And what does the average person generally say to that?
[00:08:09] Damon, why would I do that?

[00:08:12] Damon Day: [00:08:12] to that is exactly. I don’t know. You’re the one that told me you wanted to pay him back.

[00:08:19] Steve Rhode: [00:08:19] All of a sudden, you realize that it’s optional after bankruptcy. Why would I do that? It’s not; bankruptcy is the last resort. As Damon said, bankruptcy is one of the many options to consider. Let’s run through, but I think these are the most common ways to deal with a financial. The reason why you think you have a financial problem is that one day you woke up, and all of a sudden, you’re in a panic.
[00:08:42] You’ve got an emotional stressor. That’s driving you to make a decision, and here’s how you can deal with that. You can either make more money; you can reduce expenses; you could do both more money and reduce expenses. You could look at credit counseling. Debt settlement. Maybe a debt consolidation, loan, and bankruptcy.
[00:09:07] Did I miss anything? There are the most common ways to deal with it. She’s put a chicken in a bag and wave it around your head. Do you need to put haha for the transcript on that one? Cause I was joking, not debt validation. That was a joke.
[00:09:21] There are all sorts of crackpot things that you could try also. But the best way to get out of a financial crisis is to look at the overall picture. And many times, when you contact a debt relief company, they’re going to sell you the one widget that they normally sell, whether it’s credit counseling or debt settlement, rather than looking at the overall situation.
[00:09:44] And figuring out you need a little of this, a little of that. Bankruptcy might be good in your situation. And can you think of an example off the top of your head where somebody, it was clear that they should go bankrupt, but they were hesitating in doing it?

[00:10:00] Damon Day: [00:10:01] I know there’s been several. I just think of a good example. Almost all of my clients would be hesitant to go bankrupt. And again, my job is not to like, no, this is what you have to do. My job is to help walk them through it.
[00:10:15] and play devil’s advocate and Okay.
[00:10:17] If we let’s what would happen if we avoided this and went down this path now, what would happen if we did go down this path?
[00:10:24] But I find a lot of it is so much of a fear of the unknown. They haven’t really ever looked at bankruptcy. They haven’t talked to a bankruptcy attorney, and I understand too because you call a debt settlement company, and they want to sell you a debt settlement.
[00:10:37] I have a lot of bankruptcy attorney friends, but I gotta be honest if you call most bankruptcy attorneys; they’re leaning towards bankruptcy. Oh, you’re calling me. You must want to file bankruptcy. Exactly. So you gotta take the good with the bad there, but it never hurts to get the information.
[00:10:54] And I find once I can walk a client through the process and say, okay, based on your situation, This is what would happen if you decided to file, this is what you should potentially worry about. This is what you don’t need to worry about. This is how it would go. And this is what your life would look like both now and into the future.
[00:11:11] Once they have that kind of an understanding, at least now it takes away a lot of the fear of the unknown, and they can become a little bit more open to looking at that as a potential option. If we need to now if a client is in a situation where they’re in a state where the home exemption is not going to cover their house, and they would absolutely lose their house if they filed, right?
[00:11:31] I would tell them that, and then they could decide if that’s a non-starter and if it is fine, but if you’re going to say no to something, you want to know why you’re saying no to that? Not just that, I don’t really want it.

[00:11:44] Steve Rhode: [00:11:44] And also make a well-informed decision. For example, if you’re going to spend the next five years living on a minimum budget, not being able to save any money, not being able to save for retirement, and sending all your money to your creditors. Is it better to fix the past or to try to fix the future?
[00:12:04] The past is what the hell are you clicking there?

[00:12:06]Damon Day: [00:12:06] My wife was asking me a question, and I was trying to text her back slowly. Dammit. My microphone is good.

[00:12:13]Steve Rhode: [00:12:13] It is. So are you trying to fix the past, or is it better to fix the future? The logical answer is the future, but people feel like they need to take care of all the baggage behind them. They have that more obligation. They have a duty to repay their creditors, but Damon, here’s something I don’t think people consider when you take out an agreement for credit, whether it’s a credit card or something.
[00:12:38]You’re making a promise to pay a certain amount each month. But what happens if a pandemic comes and you lose your job, and you can’t pay? But the contract is absolute, but you don’t have the money to absolutely pay. So how is that a moral conflict for people when life just happens?

[00:13:01] Damon Day: [00:13:02] The reality is that’s the risk the creditors take on. When they offer these loans, and that’s one of the reasons why you’re sometimes paying 25, 28, 29% on credit cards because they know life happens. And a certain number of people that take on this debt are not going to be able to pay it back.
[00:13:20] It’s built into the system, and technically you’re paying for it through higher interest.

[00:13:24]Steve Rhode: [00:13:24] And always, if you’ve file bankruptcy, you’re now able to start saving for the future saving for retirement. So you’re not eating cat food when you’re 85, and you have the ability to repay your creditors for the debt that was legally discharged and you don’t own anymore. Go for it. Now my, my experience and I think you should, but my experience was after my bankruptcy when I felt terrible. I wanted to repay my creditors; something happened that I could never have envisioned, which was, I would send checks to my creditors to repay them, and they would send them back and say, please don’t send any more money.
[00:14:05] And the reason was for me, it was personal. I was trying to meet what I felt was a moral failure on my part for them. It was just another account that had now been closed because of bankruptcy, and they’d moved on, and they didn’t have any place to apply for that money. So the lesson is your creditors are not making judgments about you.
[00:14:28] You’re just another account on their books. And ultimately. You need to do what is best for you, your family, your future and plan for retirement. Cause we have a terrible retirement crisis in this country right now.

[00:14:43]Damon Day: [00:14:43] Yeah. And I always tell clients all bankruptcy does legally get you out of that obligation to pay. And just like you said, Once you’re in a better financial position than you are right now.
[00:14:54] You could try to pay it back if you really felt like it. But the important thing is to get rid of that legal obligation so you can survive and build whatever is going on back up and start saving for retirement and taking care of your family.
[00:15:09] And then you can worry about your creditors on your own time, because if you leave that legal obligation hanging over your head, Your creditors, aren’t going to have the same warm, cushy feelings about helping you out as you have about maybe really wanting to meet your obligation. And if it’s time to Sue you, it’s time to Sue you.
[00:15:27] And that’s just the way it’s going to be. Whether you can afford to pay it back or not. So the bankruptcy alleviates that fear, and that stress from your life of, Hey, is the next knock on the door. We’re going to be the process server when I’m trying to make rent.
[00:15:40]Steve Rhode: [00:15:40] Dave Ramsey says bankruptcy is the worst thing you can ever do. It’s the most horrible thing that you can ever do. But I got to tell you; Dave Ramsey filed bankruptcy. I worked out pretty well.

[00:15:49]Damon Day: [00:15:49] He’s doing okay.

[00:15:51] Steve Rhode: [00:15:51] I love how he’s preaching the don’t get a credit card, stay away from credit, don’t file bankruptcy. He’s preaching all of these things. They make absolutely no financial sense. And yet people love that stuff.

[00:16:06]Damon Day: [00:16:06] His strategies will work great for some people, and they’re horrible for other people. Just like any other strategy, and there’s no one size fits for anybody. People have different personalities, different situations, and some people would look at Dave Ramsey’s ideas of having roommates come in and eating beans and rice and sacrificing everything too.
[00:16:26] pay every dollar back as ludicrous.
[00:16:28] And then other people would look at that as the greatest idea ever. There’s an audience for everything.

[00:16:34] Steve Rhode: [00:16:34] Yeah, that’s true. Another thing that I don’t think that people consider all the time is the kids and the family and your safety. So sometimes, bankruptcy might be.

[00:16:45] Damon Day: [00:16:45] Yeah.

[00:16:46] Steve Rhode: [00:16:46] A, not a, not the perfect decision. It might not be the one that you want the most, but sometimes you have to decide between being able to live in a safe neighborhood, send your kids to a reasonable school.
[00:16:59]And it’s just a hard decision that you have to make sometimes, but avoiding it doesn’t make the situation. Yeah.

[00:17:05]Damon Day: [00:17:05] Yeah.
[00:17:05] And sometimes whether it’s not your fault or bad decision-making or whatever, sometimes know, you gotta leave the past in the past. And like you said earlier do you have a bigger obligation to the past or the future? And there’s nothing you can do to change the past, but there’s something you can do to change it.

[00:17:22] Steve Rhode: [00:17:23] Tell me what you think it is that drives people to reach that panic moment where they feel like they need to do something right now.

[00:17:30] Damon Day: [00:17:31] Most of the time, it’s not until that I find people are, most people are optimistic, right? Like I’m going to get that raise, or I’m going to get that bonus, or things will get better next year, whatever it is. And so their issues tend to drag on and drag on rather than taking that positive step or that initial action of settling the debt or filing bankruptcy or whatever it is.
[00:17:54] But I think for a lot of my clients, most of the calls that I get and we’re going over their situation, or right at the time where they reached that tipping point where the credit gets maxed, the bills are coming in. And for the very first month, they have no way to juggle that before up until then it’s always been I can throw this debt on this new zero-interest card that I got, or I can pull a little bit out of my dwindling savings or do this, or do that by the time I get the call, it’s usually, Hey, I’ve got this bill due.
[00:18:26] And next week, and I literally don’t have the money. If I pay that, I won’t be able to pay rent. They don’t have a way to do that. So they’re about to fall behind, and they’re panicked about that because they’re probably never been behind on a bill in their life. That’s the panic moment.
[00:18:40] They’re about to fall behind, and they have no idea what’s about to happen when they do.

[00:18:44] Steve Rhode: [00:18:44] Yeah. And many times, they’ve drained whatever little savings account they had to get to that point. So now they’ve got a bill to pay that they can’t pay. They’ve got little to nothing in the savings account, no financial safety network and. There they are panicked. I can’t sleep, sleepless nights, stressed, everything else.
[00:19:05] And so people will jump and take some sort of step that they think is good, without talking to a professional like yourself without working it out and getting all the facts. And what I suggest to people is just don’t jump. If you want to think about debt settlement, talk to it. That’s not on the company you want.
[00:19:24] Then, if you do that, you should talk to a credit counseling group. You should get a free consultation with a local bankruptcy attorney. You should talk to somebody like Damon Day. You should get all the information. Make a fully informed decision about what is right for you. And then do that without making decisions about myths or assumptions or anything.

[00:19:45]Damon Day: [00:19:45] Yeah, absolutely. And if you have the ability to gather that information, as you start to see that you’re in this cash flow deficit, try to gather all that information and get ahead of it before you get to the point that. You’re out of savings, you’re out of everything, and you feel like, oh my gosh, I have to decide by next Friday.
[00:20:08] That’s when you make bad choices, and you have a sales guy telling you, oh, don’t worry. We’re going to take care of it. You hire us; you send us $800 a month. You stopped paying all your other creditors, and we’ll handle it all. And you just feel like the sense of relief, even though something in the back of your mind is saying, this doesn’t sound quite right, but you weigh that against missing a payment and not knowing what’s going to happen.
[00:20:28] So all of a sudden, these sales pitches that under normal circumstances would make the hair on the back of your neck. Stand up. Sound pretty good because you don’t know what else to do, and you’re panicked, and you feel like you need to make some decision by Friday.

[00:20:42] Steve Rhode: [00:20:42] So let’s run through what normally happens when. All behind you miss a payment. Things just don’t fall off the cliff instantly. There’s a queue or process that things flow. And so Damon, what happens first?

[00:20:58]Damon Day: [00:20:58] Nothing. You miss a payment. You wake up the next morning and do the same thing you did the day before. Nothing’s different. You probably won’t even get a phone call. In fact, Not a damn thing is different. About 10 days later, you might start, you either get an email or maybe a courtesy call you Mr.
[00:21:16] Payment. But other than that, nothing’s going to change. In fact, you won’t even get a 30-day late ding on your credit until about 45 plus days after that, Cause you’re not 30 days late when you miss a payment, and they don’t report one day late. They don’t report 10 days late. Right now, you could get a little fee $29 fee or something like that.
[00:21:38] But until you miss your second payment, you don’t even need to worry about your credit report.

[00:21:43] Steve Rhode: [00:21:43] Okay, so now I’ve missed my second payment. What happens is somebody knocking at my door to take my mattress or my kitchen utensils.

[00:21:50] Damon Day: [00:21:51] No, only your TVs. They don’t like mattresses.

[00:21:53]Steve Rhode: [00:21:53] hairdryers.

[00:21:54] Damon Day: [00:21:54] I kid again. Yeah, no, nobody’s going to show up. It’s not like that. The phone calls just started to become more frequent. They want you to start making a payment. But basically, it’s just phone calls, and you won’t even really start getting collection letters yet.
[00:22:10] You’ll just get your next step. And it’ll say miss this payment. So now it’s a double payment that’s due, and that’s basically all; it’s going to be with a couple of friendly phone calls that you can ignore. We have caller ID,

[00:22:22]Steve Rhode: [00:22:22] What about 90 days? I haven’t made my payment in 90 days.

[00:22:26]Damon Day: [00:22:26] same.

[00:22:27]Steve Rhode: [00:22:27] This is why when the collector calls, if you can’t afford to pay, don’t make a promise to pay, but you also don’t have to yell at them and insult them. Anything else? You can just be friendly if you pick up the phone and it’s a collector and just go Bob bye. I don’t have the ability to pay. I can’t make a promise to pay.
[00:22:48] Things are uncertain at the moment. I got laid off because of a pandemic. But thanks for calling Bob. Have a nice day. Yeah,

[00:22:56] Damon Day: [00:22:56] well, Steve, I only have your best interests at heart, so I don’t want to help you solve this problem. Cause you’ve been a great customer here for the last 10 years. Maybe you have any family members that can loan you some money.

[00:23:06]Steve Rhode: [00:23:06] No, they’re struggling too, but I could add. be the

[00:23:10] Damon Day: [00:23:10] Oh, yeah, I think you should ask. So can we three-way them on the phone right now? Who are you thinking about?

[00:23:14] Steve Rhode: [00:23:14] oh see, damn, I’ve walked myself right into that one.

[00:23:18]Damon Day: [00:23:18] Yeah, let’s just call them right now. We’ll see if they can help you out. Maybe they can give you $200. We make this payment and get you back squared away. So if I did that, actually, it wouldn’t be solving any sort of problem. It would just be pushing it down the next month because I borrowed $200 from a friend, or I got a payday loan or something like that. And to talk about how ridiculous it is to try to please the creditor. I had an email yesterday from somebody who said.

[00:23:43] Steve Rhode: [00:23:43] They have been a loyal American express customer for 25 years and

[00:23:49] Damon Day: [00:23:49] American express. Don’t give a shit.

[00:23:50] Steve Rhode: [00:23:51] And they’ve never been late, never missed a payment. And they had a balance, and they just finished paying it off, and American express terminated his card and canceled all of it. Frequent flyer points or whatever brownie points you get with American express; hey, it’s the creditor’s card. They can do whatever they want with it.
[00:24:11] You’re just using it at their pleasure. And

[00:24:14] Damon Day: [00:24:14] why did they do that? Steve?

[00:24:17] Steve Rhode: [00:24:17] Because he apparently fit their algorithm on risk or something else. And

[00:24:23] Damon Day: [00:24:23] No, no American express did it because American express doesn’t give a shit.

[00:24:29]Steve Rhode: [00:24:29] And they came they took their ball and they went home is what they did.

[00:24:33] Damon Day: [00:24:33] Yeah, exactly.

[00:24:35]Steve Rhode: [00:24:35] I love it because American express decides for you, a financial decision it’s based on numbers and whatever their business process and policy is at the moment. And the consumer is worried about offending their creditor. When they find themselves in an accident, losing a leg, sick pandemic, whatever it just is what it is.
[00:24:58] You need to make the best decision based on the facts, not on emotion.

[00:25:03]Damon Day: [00:25:03] Yeah.
[00:25:03] And I always tell people, you should not pick up the phone emotionally. You’re going to feel like you’re going to want to pick up the phone. And talk to the collector. You’re 30 days late. You want to explain your situation. Let them understand, and they can put a note that, oh, Susie is having a hard time.
[00:25:17] So we’ll just get back to you next month. It doesn’t work that way that that person’s job is to get a payment from you. That’s it. So I always tell clients until you have a strategy of what you’re going to do overall, because. Borrowing 200 bucks to make that guy happy, right?
[00:25:33] There is not going to keep them from calling next month. And it’s not going to keep the other creditors that you miss from calling, right? All you’re doing now is now you owe your friend 200 bucks, and it’s just wasted. So do not talk to any creditors under any circumstances until you have a strategy until you understand where you’re at right now and where you’re trying to get and how you’re going to get there.
[00:25:57] Once you have that information, then you know what you need to do with that collector. Maybe it’s ignoring them for another couple of months. It depends on what the strategy is going to be. If the strategy is going to be, Hey, this layoff was temporary. I’m about to get a new job, and I want to save my credit, and I want to get back on these payment plans, but I just can’t right now, then it might actually be a good time to talk to that creditor when you’re 30 or 60 days late, they can probably get you on some kind of a rate reduction plan that they have.
[00:26:24] And so it would be good to talk to them, but if you don’t know that or you don’t have a strategy. You don’t really want to be on the phone with them, agreeing to some rate reduction plan. When the reality is you’re going to need to go bankrupt. And if you’re going to go bankrupt in six months, whether you realize that at the time or not, the last thing you want to do is be given a creditor $200 a month on the way to the courthouse, right?
[00:26:43] Keep the damn $200 a month. Don’t give it to the creditor. Take your wife out to dinner before you file bankruptcy, whatever, go to a Lobster pounds, spend it up.

[00:26:52] Steve Rhode: [00:26:52] Lobster pound. So what you just said is not talking to the collector unless you’ve got some sort of solution. How about this? People will talk to the collector. The collector is either going to use pain or pleasure to try to get you to pay. I’ve yet to have a debt collector ask if they can come over and take me out today.
[00:27:09]In exchange for a payment. So it’s going to be some sort of pain point. They want to push. And I’ve heard so many times I’ve heard people say if you don’t like it, Sue me. And one time, I got off the phone with this national creditor, and I was talking to the collection manager, and he goes, yeah, I just spoke to that client of yours.
[00:27:29] And he said if you don’t like it, Sue me. It doesn’t take much for a creditor to Sue you. They just drop, move your name from one folder on their desktop to another folder you end up in that bucket, and then you get sued. You don’t need to invite it. You don’t need to be rude.
[00:27:43] You don’t need to be obnoxious. You don’t need to be anything else. You need to have a plan and then execute that plan. Here’s another thing that drives me crazy. Somebody hasn’t made a payment in a year. Collector calls, and then they make a promise to make a payment, even though they don’t have the money because they want to get the debt collector off the phone.
[00:28:02] Good idea. Bad idea.

[00:28:03]Damon Day: [00:28:03] Horrible. Horrible idea.

[00:28:06]Steve Rhode: [00:28:06] it’s going to restart the statute of limitations, and it’s going just to keep the account active, and you just, you shouldn’t do that. Yeah.

[00:28:16] Damon Day: [00:28:16] And every once in a while, you’ll have this old zombie debt, and you’ll open the mail one day, and there’ll be some offer for $50 just to make a payment. And it’s $50, $10,000 debt. And it’s, CEO’s six, seven years old time to make a fresh start and just you’d get on an easy payment plan, $50 and people get excited.
[00:28:32] And then, you know what? I can afford $50. I’m going to send in the $50. Same principle. All you did was open the door for them to Sue you down the road. another. a couple of years, if you want, if they want to

[00:28:43]Steve Rhode: [00:28:43] Here’s another myth. Damon, if I can only send what I can afford, they can’t Sue me. So I’ve been sending $5 a month, but I got sued. How can they do?

[00:28:53] Damon Day: [00:28:53] All you’ve been doing is just allowing the statute of limitations to stretch on and on and giving them as much time as they need to Sue you eventually. And they can sue you because you’re still breaching the contract. Sending $5 was not what the agreement was.

[00:29:06]Steve Rhode: [00:29:06] So ultimately. We bring this all around too. You need to develop a real solution based on facts that fit your current and future financial life. And the best way to do that is by getting truthful, honest information and then making the best decision for you and your family. Any closing words?

[00:29:27]Damon Day: [00:29:27] Yeah, there and there’s rarely any them emergencies. So when you’re on the phone with somebody and they wanted you to sign up yesterday, and they’re shoving the contract in your face, and we’re going to fix this, we’re going to take care of it. There’s rarely an emergency there’s, especially if you’re talking to a debt settlement company or something like that; there’s nothing they can do for you immediately.
[00:29:45] Anyway, in fact, they’re going to ignore your creditors for a while after you hire them. Anyway. So don’t. Rushed decisions. Take your time, take it all in, get all the information and think about it. Anybody tries to press you to sign up. They’re more worried about making the sale than helping you out.

[00:30:02]Steve Rhode: [00:30:02] The funny thing is if there is truly an emergency like you’re going to get foreclosed on tomorrow, they’re going to repossess your car tomorrow. The irony is the solution to stop it. Is bankruptcy. A chapter 13 bankruptcy will stop the foreclosure and stop the repossession, and people who are afraid to think or consider bankruptcy would miss that entirely.

[00:30:27]Damon Day: [00:30:27] Yeah, I’ll say real quick, if you’re that far gone. You’re about to get foreclosed on, or you’re about to get to know your wages garnished because a creditor sued you. There’s nothing a debt settlement company can do for you in the last couple of days before you’re going to get your wages garnished.
[00:30:40] At that point, a BK is pretty much your only option if you’re trying to stop the wage garnishment.

[00:30:45]Steve Rhode: [00:30:45] All right, Damon will. Thank you very much for another exceptional. Thank you very much for another podcast. I had to take exception a lot.

[00:30:54]Damon Day: [00:30:54] a lot.
[00:30:55] of editing on this one. And that was actually a client creditor calling me just now cut off my audio. I apologize.

[00:31:02] Steve Rhode: [00:31:02] Oh, so you’re busy dealing with this stuff all the time. If you want to talk to Damon,

[00:31:07] Damon Day: [00:31:07] But what did I do? I ignored him. Like you’re supposed to do.

[00:31:11] Steve Rhode: [00:31:11] Thank you. You can talk to Damon Damon day.com and work with him. Talk to him about putting together a plan that deals with your situation. See ya.

[00:31:21]Damon Day: [00:31:21] Tata.
[00:31:23]

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