“June, 2007” Archive
Jun
30
For the most part, the comments I receive on this site are positive comments, not filled with sympathy or pity, but just kind words of support or encouragement. This blog was intended to chronicle MY journey to repay my debt, and wasn’t designed to mirror the way anyone else dealt or is dealing with their debts. I am a very resourceful person who understands my rights as a consumer and I am using all the resources available to me in order to conquer this debt.
The situation with AMEX seems to have stirred up the pot a bit for some people. Some folks see my negotiations with the collection agencies who are handling my AMEX accounts as an attempt to ’screw my creditors’. Here I must disagree, as I made a good faith attempt to work with AMEX in order to repay the entire amount owed. AMEX gracefully declined and their own collection folks advised me to wait until the account went to collections as I would then have more room for negotiation, INCLUDING a settlement offer.
One commenter in particularsees this tactic as an attempt to ’screw my creditors’. Again, I made several attempt to work out a payment arrangement whereby AMEX would be paid in full over a period of 5 years. They showed no interest in this arrangement so I proceeded to work with my attorney and the collection agencies on a settlement. A lump-sum settlement for less than the total amount owed would seem to make no sense given my offers to repay in full, but when you consider the time-value of money it does indeed make sense from the perspective of AMEX.
Now, where I do take issue with this commenter is his attack on my character and the mention of my daughter. As I stated in my Privacy Policy I will never censor any of the comments posted here unless the comment promotes hate, uses foul language or promotes something illegal because I want to promote healthy debate on the site. None of my readers know anything about my character, my skills as a parent, the love I have for my daughter or my interactions with my family, other than what I mention here, so I was a little surprised at this reader’s reaction. What matters is that I know I am a caring, loving parent who will show my daughter how to avoid some of the mistakes I have made in life. If that isn’t ‘honorable’ so be it, but that is my plan as a parent.
Jun
29
Much to my surprise I got a new statement from American Express–complete with late fees and additional interest–for each of the two accounts that are being handled by the collection agencies. This makes me wonder if the debt has truly been passed on to these agencies or if American Express still owns the debt. Given that I had only fallen 60 days behind at the point the outside collection agency became involved, I would posit that these accounts haven’t yet been charged off; this usually happens at 180 days.
I will be sending the statements to my attorney today (per her request) and we will see how things proceed from there. My attorney has sent out letters of verification to the collection agencies, which may prove interesting given the debt may potentially still reside with American Express and not the collection agencies. I will keep you all posted on how things proceed.
Jun
28
Thanks to everyone who has stuck around over the past few days as I have spent quality time with my family. My daughter’s third birthday was a smashing success and we had a great 4 days together doing all kinds of fun things here in Seattle. My employer provides a plethora of discounts on local attractions, including most of the kid-friendly venues, so costs were kept to a minimum. Thanks to everyone who posted a comment for your kind birthday wishes.
On the monetization front, my appeal to Google regarding my AdSense account was turned down. So, along with my AdSense account went nearly $1,000 in advertising revenues. Oh well! The good news is that YPN - Yahoo Publisher Network has approved me for their beta so I should be able to monetize the site that way. I never intended to get rich by blogging about my situation so no big deal, no matter what happens. I will continue to blog about my journey and take things from there.
I’m pretty exhausted today after getting back to the grind, so look for some fresh content tomorrow, including a new poll. My Feedburner stats have been as high as the mid 90s and now I find myself back in the 60s so it looks like there is some built up demand for some new postings.
Jun
24
I apologize for not posting for the past few days. I have family in town and given how rarely I see members of my family because of geographic distance, I have been spending as much time with these folks as possible. My daughter will be here for several days starting today so we can all celebrate her third birthday so my posting will likely be brief and sporadic over the next few days. To all my loyal readers, I hope you will understand my need to spend some quality time with my daughter. The poll results from the current poll are pretty astonishing (in my opinion) so I will try and share some insights I have gained over the past 10 days of intensive treatment for my bipolar disorder. I spent a fair amount of time talking about the debt I find myself in as well as the emotional baggage associated with it. I hope everyone has an enjoyable remainder of the weekend.
Jun
20
Yesterday I received the letters from Citibank detailing my repayment plan for three of my credit cards, representing nearly 33K of my debt (Diners Club is a Citibank product and is also at 0%). As I mentioned in an earlier post, Citibank worked out a great deal with me; 0% interest over 5 years. Obviously I will try and repay this much quicker as I get any additional income from my side businesses, but the payments are very manageable and nearly $125 less, per month, than the DMP suggested payment. With much of my debt either at 0% or in settlement negotiations (AMEX), the question is do I still need a DMP?
The amount of debt that is still ‘out there’ without any concessions is approximately 15K, consisting of apporximately $6,500 with CHASE, $7,000 with Bank of America and the remainder with AMEX on a closed account with a much smaller, manageable balance and interest rate. I have two other cards with limits of $1000 or less than currently have a zero balance. So, the question is do I still need a DMP or can I pay these cards off on my own, protecting my credit score a bit. I have been, and continue to pay all these cards on-time so keeping one or more of these accounts open as I pay them off, could help protect what is left of my credit history/score.
Currently CHASE is at 7% but that was only a temporary relief measure for 3 months so that card will go back to 29.99% next month as I was late a few months back by 2 days; no reporting to the credit bureaus but CHASE put me at the default rate. Bank of America is at 16.24%, AMEX at 18.29%, both of which, while high, are certainly manageable given the balances. So, my plan is to contact Chase directly and hopefully work out the same plan, 7% interest, that the DMP would give me. If I am successful with that, I will keep the Bank of America account and the two other cards with smaller limits, open so I still have some sort of credit history.
If successful with CHASE, I could effectively avoid a DMP. Frankly, thus far, I have been able to secure better deals with all my creditors than the DMP offered, which is somewhat surprising given the credit counseling agencies are funded, in part, by the credit card companies. That said, credit card companies typically return 15% of the money they receive through DMPs back to the agencies, so perhaps this is the incentive for working directly with the creditor.
So, next step is to try and work something out with CHASE. In the past CHASE has been one of the creditors least likely to be flexible, much like AMEX, but given that I have worked out plans with almost all of my other creditors, I may have some leverage with CHASE. Their reluctance has typically been the fact that I have other debtors and they felt they would be at a disadvantage by working directly with me. Well, that clearly is not the case anymore, so hopefully I can work things out with them. Stay tuned. I will be making the call today and hope to update my readers by the end of the day.
Jun
19
As my loyal readers now, I–through my attorney–am currently negotiating with AMEX to settle nearly 20K in credit card debt. It is likely that the debt will be settled for something around 50% of the total due, which means nearly 10K of the debt would be forgiven by the creditor. I hadn’t thought at all about tax consequences until my attorney mentioned this to me. Much to my surprise, it looks like my debt ‘forgiveness’ may carry with it some serious tax implications.
According to the IRS Publication 525, the amount of cancelled or forgiven debt is generally considered taxable income; this includes income. This seems like a very cheap tactic by the IRS to collect more revenue, arguably from taxpayers who cannot afford it. The amount of debt forgiven isn’t taxable in certain situations:
- The debt is canceled in a bankruptcy case under title 11 of the U.S. Code
- The debt is canceled when you are insolvent. However, you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent
- The debt is qualified farm debt and is canceled by a qualified person
- The debt is qualified real property business debt
- The cancellation is intended as a gift
Now, as much as I would like to think AMEX would give me 10K in debt forgiveness as a gift, this isn’t likely. The only way I can avoid having to pay income tax on the forgiven debt is to prove I was insolvent at the time of the debt forgiveness. Given I will have sold off most of my assets by the time I repay AMEX–arguably IN ORDER to pay AMEX–I will have very little in the way of assets. I rent an apartment and I lease a car so I have very little in the way of tangible, liquid assets. I will absolutely have to consult with an accountant for my taxes this year.
The moral of the story is that while if you end up negotiating a debt settlement with a creditor, be sure to include in your calculations the tax implications. How much debt forgiveness would it take to push you into the next tax bracket? Is it worth it? These are all questions you should consider before making any settlements. When in doubt, talk to an accountant or other qualified professional.
For all of you who made it this far, be sure to enter the Windows Vista giveaway. This is a gift from me to you, so don’t worry about any tax implications.
Jun
15
Today I got an email from Google stating that my AdSense account had been disabled because there were invalid clicks/impressions detected on my account. I had a huge spike in traffic and clicks when my CNN interview aired that lasted for a few weeks which drove the click-rate and number of clicks MUCH higher than they had been. Other than that, I have had the occasional day where my click-rate has been higher than normal but I often don’t get any clicks in a given day. I have appealed to Google, because as my readers know, I have NEVER encouraged anyone to click on my ads or otherwise generate invalid ad impressions. I hope that Google will reinstate my account or all the hard work I have put in over the past two months will essentially be wasted. At that point, I might have no choice other than to put up a donation button. Come on Google, work with me here. I’m too non-technical to have an automated click program running.
Jun
15
Even my attorney cannot clearly determine, after looking at all the correspondence and my credit report, who exactly still owns the debts from American Express. As a first step and in an effort to determine who really owns the debt, the debts will be be verified in accordance with the Fair Debt Collection Practices act. Yes, this is little more than an attempt to make the debt collectors wait longer for any kind of settlement but it is also a potential avenue for them to make a mistake, in which case I will not owe anything. I don’t anticipate this to be the case so I have planned on settling the debt and am setting the funds aside to do so.
Assuming the debt is verified, my attorney will then try and secure a settlement of 40% of the original debt, along with the stipulation that any reference to a collection account be deleted from my credit reports and that AMEX will report the account as ‘paid in full’ rather than settled or charged off. I think the collection agency will oblige because logically they have no reason to keep the negative reporting on my report if they get paid. Collection agencies, particularly around the end of the month, just want to get paid, period! I will likely have to settle for something in between what I want and what AMEX will do in terms of reporting the debt, however. That’s fine to be perfectly honest. No matter what happens it will take a few years for my credit history to rebuild itself. In the meantime, I will use a debit card that either gives me frequent flier miles or cash back for the everyday things I need to buy, i.e. gas, groceries etc.
I hope to have some more definitive news in a few weeks once the debt is verified and the true negotiation begins. Who knows, perhaps the collection agencies will screw up and the debt will just disappear. Okay, wishful thinking 
Jun
15
AMEX is absolutely unreal. In an earlier post, I mentioned that the collection agency that is handling one of my accounts said they were authorized by AMEX to offer me an Optima Card should I choose to pay my entire balance in-full. Well today, I get a letter from AMEX offering me just that. These people are UNREAL.
This is a company who was completely inflexible and wouldn’t negotiate with me under any circumstances. Once the account went to collections however, I get an offer, right out of the gate of 57% of the original debt. That, like I said, made NO sense to me. Not only will I never do business with AMEX ever again–even if I have the opportunity–but I’ve plan on settling with them for as little as possible, even if it takes months to negotiate.
I just love the tone of the letter they sent me. It is a combination of ‘trying to be my friend’ and trying to guilt and pressure me into paying my balance in full.
As a previous American Express Cardmember, we value our relationship
HA! That is some funny stuff. I know this is a form letter but I’m going to critique and attack it anyway. They value ‘our’ relationship so much that they refused to negotiate any kind of reasonable payment plan which would have allowed them to collect everything that I owed them. They value ‘our’ relationship enough to pass my account on to one of the most unprofessional and frankly law-breaking collection agencies out there. With friends like that, who needs enemies.
Next comes the time pressure:
This offer is for a limited time, so you must act immediately
Oh my goodness. I better run to the phone, call the dirtbag colllection agency and give them my checking account number so they can automatically debit my checking account–only for the amount of my debt of course–and then I can get an Optima Card with a $5,000 limit so I can bury myself in debt again. Thanks AMEX.
In the same paragraph with the header “Limited Time Offer - Call 800-XXX-XXXX” there is the real reason AMEX has sent me this letter
This communication is an attempt to collect a debt
Now, here is where I might find some enjoyment. Both collection agencies, who are now acting as agents for AMEX have been made aware, both verbally and in writing that this matter is now in the hands of my attorney. Thus, any and all communication must go through my attorney, not me. This is a legal requirement per Section 805 of the Fair Debt Collection Practices Act (FDCPA). So, is AMEX breaking the law here? Well, I need to call my attorney, but it would certainly appear so. If they are, then I will file a $1,000 lawsuit in small claims court here in Washington, which I am entitled to do per Section 813 of the FDCPA. Yes, this whole process has made me a little bit of a ‘legal eagle’, whereby I have learned all about my rights as a debtor.
For those of you out there who don’t have access to an attorney, a thorough reading of the FDCPA should be your absolute first step in protecting yourself. KNOW YOUR RIGHTS!
UPDATE: Don’t forget to enter the Two-Month Anniversary giveaway here at Dollar Buy Dollar
Jun
15
Since I have been absolutely consumed with getting my own financial situation under control and locked in with a plan to repay the debt, my reading my fellow bloggers’ sites has been very limited until a few days ago. Both my employer and my doctor have forbidden me from checking work email or otherwise doing any work from home during the duration of my intensive treatment for my illness. So, I figured I would get back to some good Personal Finance blog reading this week. So, without further ado, here are some of my favorite posts this week:
- Tricia, over at Blogging Away Debt has a unique suggestion on how to make some extra money. Another way to make some extra cash, at least in my experience has been with focus groups. One of the companies I have had the most success with is Fieldwork. It doesn’t cost anything to register and the focus groups I have been involved with in the past have paid between $100-$300 for 1-3 hours of work.
- Becoming & Staying Debt Free had a nice post about 7 Ways You Can Join Forces With Friends to Be Frugal. I never really thought of friends as motivation because I always made the assumption, incorrectly as I have learned, that my friends were either in much better financial situations than I found myself or they weren’t comfortable talking about money.
- Mapgirl’s Fiscal Challenge talked about how to not spoil your kids and ruin your retirement. I caught the original article on SmartMoney.com but I wanted to thank Mapgirl for the great activity suggestion in her post. My daughter’s birthday is in 10 days and she will be visiting me here in Seattle, so I plan on trying this activity out for some cheap fun. Thanks Mapgirl!
- Flexo over at Consumerism Commentary talk about his struggle to save money via brown-bagging his lunch to work each day. Given how tight my budget is going to be for the remainder of this year once all my debt payments kick in, i.e. next month, brown-bagging is going to become an absolute necessity for me.
- Free Money Finance discusses the costs of being overweight. I know for a fact that my company saves at least $2.00 for every $1.00 they spend on my diet and exercise program I discuss at Pound Buy Pound.
- DebtKid discusses the possibility and pros/cons of declaring bankruptcy. Having considered bankruptcy myself, I can empathize with DebtKid
