Snapshot of Debt & What to Do to Protect Yourself

Millions of Americans are seeking alternatives to bankruptcy by hiring a debt management agency, seeking debt settlement as opposed to consolidation. If you have ever listened to the Dave Ramsey show or watched commercials on television, then you will understand that many Americans are over their heads in debt, desperately seeking a way out in order to keep from losing everything they have worked for all their lives.

Why should this be a problem in the twenty-first century? Americans have engineered the finest standards of living that the world has ever known. Every country in the world envies the American way of life, striving to create an empire to entice visitors and immigrants. Only in America is it possible for a person to achieve the highest ambitions and the freedom to live as he pleases. Indeed, few countries can compare to America's "land of the free." Yet our very freedom has become a noose about the neck of the average American today, waiting in agony as the seconds slip by with no hope of rescue.

What happened? How did America become so enamored of the almighty credit card? Whatever happened to affordable health care and insurance? When did housing become a luxury for the rich? How did cable television replace free TV?

Most of us have parents or grandparents or even great-grandparents who grew up during the depression years after the stock market crash of 1929. We grew up calling that era "The Olden Times," when the water on the bedside table was frozen by morning, and the only heated room was the kitchen, warmed by a wood-burning stove. Taking weekly baths on Saturday night, using the same three inches of bath water for every family member. Washing of hair a separate ritual, drying it in front of the fire by hand. Outhouses. Water pump in the yard. One rickety old truck. Migrant workers. No jobs. Dust. Famine. Women taking in laundry from the rich to feed their children. Foster children beaten and starved, used as slave labor in farming regions. Children abandoned by parents who could not afford to feed them. Overflowing orphanages. Illegal adoptions. Babies kidnapped and sold for profit.

Then, there were the war years of World War II when women were accepted in plants and factories. Ration books. Every member of the family working, even children. Collecting bottle caps, tin cans, paper for the junk man. Darning socks. Telegrams. Death. Hitler. Jews. Concentration camps. Starvation. Disease. Refugee camps. Pearl Harbor. Japan.

The prosperity of the post-war years meant new clothes, no more rationing, jobs for men, new cars, booming business, and the single-minded determination of every man and woman to have a family and provide for their children, giving them what they never had. Those children became "The Baby Boomers." Their impact on our society today has been profound. They are responsible for the Peace Movement, heroes of individualism and personal freedom, political leaders whose efforts produced results-new laws protecting an individual's right to life and freedom. Superb singers and song-writers, actors, presidents, Oprah, and countless more have contributed in boundless ways towards better living for everyone.

They also grew up wanting what their parents took years for them to afford-cars, furniture, second homes, yearly vacations, braces for their children's teeth, and they did not want to wait as long as it took their parents. They wanted everything now. Right away. While their parents, as newlyweds, were saving their money for the future, the Baby Boomers were spending money faster than they were earning it. For the first time, children born during the Baby Boom years of 1946-1964 were expected to attend college, a fact unheard of two decades earlier. Jobs were plentiful, and with the advent of the computer industry, the job market seemed endless.

So, what happened? Sure, the economy has suffered repression and has been on the verge of depression once again, but with rising prices of goods, the cost of living rising even higher-what is happening to us as a nation? Have we all become complacent with our little niche in the world, or are we becoming forgetful of why we, as a country, as a people, have been so incredibly successful? What is really happening to people who need to work?

The average adult, making minimum wage of $5.15 an hour can only hope to make $10,712 a year, and only if he works every single five-day work week all year long. No holidays. No sick days. No time off for annual physical check-ups. He cannot afford to be sick. In this age of horrendously expensive health care, one ill-timed sickness could cost a man his job, putting him behind in paying rent, utilities and food. Forget gas. He can only afford to ride a bicycle. With monthly rent for a one-bedroom apartment averaging $550 to $650, electricity ranging from $50 to $250-if he has no gas heat--water and sewage fees averaging $35 to $50, and cable coming in at a whopping $75 to $200-the average single renter pays $710 per month for the privilege of living alone, on poverty level, allowing him the sad sum of $114 to cover the cost of food, gasoline, car repair, medical bills, clothing and entertainment. Sad to say, if the man is unfortunate enough to have a gas water heater, he may be paying in excess of $1,000 per year in addition to his other utilities.

Where does a savings plan fit into this man's future? How will he accomplish saving for the future when there is little to no hope of being given a raise in pay? Sure, he can go to college. He will probably qualify for a grant-up to $2500 per semester-but how will he qualify for a scholarship when he is unable to access the web without filling out hundreds of time-consuming surveys which-clearly outlined in its terms and conditions-require the outlay of completing up to six offers for services he either does not need, does not want or finds repulsively expensive. Does he ever really reach the information he needs about applying for a scholarship? Sometimes, the answer is no. Pop-up surveys interfere. Pop-up infomercials that cannot be blocked, allowing no link and no access to where you want to go. After a frustrating three hours at the computer, the average person will feel like writing a strongly-worded letter of outrage to whichever website will listen and respond, often spending more time on his complaints than in actual research.

More than likely, the soon-to-be-college-student will find that financial aid has become a four letter word, by necessity having to borrow thousands of dollars with the hopes of having a career, a full-time job at a rate that will allow him to pay his house note, utilities, food, gasoline and have money left over at the end of the month. The American Dream. Four years pass in daily happy imaginings of a future uncomplicated by the need for money in order to survive.

Dreams of taking an actual vacation begin to arise on the horizon, warm happy thoughts of white sands, clear blue waters, gorgeous sunsets, bikinis, whisky sours served by natives at the pool. Holding your son's hand as your family visits Disney World for the first time. Buying the four-poster bedroom set in solid cherry that your fiancee adores. Buying a grill that does not require bending at the knee to turn a hamburger. Dreams of a second home arise as you graduate, certain that your perfect attendance and straight A grade average will impress your future employer so that he hires you at twice what your neighbor makes.

Then, the first interview. The shock of discovering prospective employers expect you to be thrilled at being offered $9.00 an hour to sit in the file room, preparing reports. Your job duties will entail taking folders out of a box, inserting studs to hold papers, inserting papers into the chart and re-fastening said studs, ad infinitum. Gently, you remind them you are a college graduate. You hold a degree with the highest honors. You are prepared to take on the world. You have the education and-thanks to internship-the experience to jump right into work alongside your fellow graduates. All you can think of is how you will not be able to afford the rent on the two-bedroom apartment that your fiancee wants if you accept a job as a file clerk. Visions of the ridicule you will receive stun you further.

"When we make a decision, we will call you by the end of the week. Thank you for your interest in our company, and we wish you the best of luck in your career path."

Somewhat relieved, you put the experience behind you, certain that the right position is just around the corner. After all, it was only your first interview. Three months later, you are beginning to feel disillusioned by the interview process, wondering what you could do to improve their impression of you. After six months, you realize there is nothing wrong with you. It's them. They're all crazy. They all want slave labor, twelve hour shifts with one half a day off per week with one weekend off every three months at $8 and $9 an hour. Not even offered a salary!

Out of desperation, you accept a position that is less than desirable. At least, it means money coming in every week. It will be okay until you find something better, you think. Then, they pull a fast one. After slaving for three weeks, they tell you Tuesday afternoon to take Wednesday and Thursday off. Wow! A day off! Two days off! Two days to sleep, eat and watch TV! What glory!

The next week, the same thing happens, only this time they tell you they only need you two days a week from now on, at least for a month or so. It's just temporary, they say. Your heart dive bombs, thudding into your stomach. You cannot breathe. How will the bills get paid on two days pay a week? Then, the day comes when they tell you that you are not on the schedule for that week, or the week after that, or the month after that, and you wonder if you still have a job. Panic screams inside of your mind, remembering how long it took to find this job. The need for a second job thrums along your arteries, each heartbeat beating a desperate tattoo into your brain-the vision of having to live on the streets, having no possible means of repaying $67,000 worth of school loans. No money = No apartment. No money = No food. No money = Failure.

Then, you remember that you own credit cards. Not just one. You have a Visa, and a Mastercard. As you count them, you realize you have twenty-six credit cards, most of which you have not used in years. It's the answer to a prayer. You plan how to live, how to survive until a full-time job comes your way that won't peter out into nothingness. You start looking for odd jobs that have the slightest connection to your degree, sometimes resorting to retail sales at $6.00 an hour, arriving home with leaden, aching feet that feel as if they have been encased in concrete, collapsing on the couch, unable to rise for the first hour at home.

For the first time, you notice Mexicans and other foreign nationals working at the same type of jobs you have applied for, knowing in your heart that they could not possibly have the education and experience that you possess, outraged that immigrants without an education are being given preferential treatment over Americans. With every day that passes, every application filed online, you realize it is hopeless to find a job with the current resume.

Desperate to survive as decently as possible, you realize the only course of action is to erase your skills and education from your resume so that you will get hired in a position that will allow you to live like a decent human being instead of begging constantly for help from anyone who has a heart. Accepting any sort of work at any sort of pay, wondering what the next day will bring has finally begun to feel like the American Nightmare on Any Street, USA.

Since you have no full-time job, you have no benefits, no health insurance, no savings plan, no IRA, no prescription benefits, and you pray that if you get seriously ill that you qualify for Medicaid, because there exists no other option. When the day finally comes when you cannot pay the minimum monthly payment on your credit cards, you realize that you have finally reached the end of the rope. There is nowhere to go and no one to turn to for help.

For many Americans, bankruptcy-they believe-is a way to clear their debt and begin anew.
But what if you are someone like the person described above? How would filing for bankruptcy help you? Sure, it will "clear the slate," so to speak. But how will it help you to survive?

After all, you still will not have a full-time job with benefits. You still do not make enough money to support yourself in a one-bedroom apartment and still be able to pay for transportation, health care, dental work, and all of the miserable little details of living in this luxury-obsessed economy of the United States.

If you file for Chapter 7 bankruptcy, you may not even be left with a pot to cook in or a mattress to sleep on. Chapter 7 means LIQUIDATION. Under Chapter 7, you are only allowed $4000 of property that is exempt, and that particular law changes from state to state. Some states will not allow you to keep your car if the resale value (bluebook) is over $3000. That means you will be driving a junker. You will be living in an empty room without any means to keep yourself warm unless you pile all of your personal clothing on top of you. You will have no bed, no blanket, no lamp to see at night, no television to while away the hours, no books to read, and no family heirlooms to pass onto your grandchildren. You may not even be able to keep your diamond engagement ring!

If you are one of the fortunate ones to have inherited furs, good quality gemstones in diamonds, emeralds, rubies, amethysts, jade and so forth, you may be required to sell the entire collection in the liquidation sale to satisfy your creditors. Quality furniture in solid hardwoods are quite valuable and receive high bids at auction because they can be refinished and resold for higher prices. Your computer will be confiscated. The bear hide that you use on your bedroom floor in front of the fireplace will become a fond memory.

Realizing this reality of bankruptcy can be quite a shocking revelation for many people, one alternative has been to use debt relief agencies, thinking the law firms will settle their debts and the misery will end. In actuality, the misery will be just beginning. According to a 2005 report from the Federal Trade Commission, many of these debt relief agencies are scams, offering services and guarantees that they cannot perform while taking money from a trusting public, using tax exempt status to give them a "good" name. The report states that over 9,000,000 Americans contact these agencies every year, and more than 2,000,000 are currently enrolled in debt relief programs. The Internal Revenue Service regularly investigates agencies who claim non-profit status, and at the time of the report the IRS was auditing over 48 of these agencies.

A debt relief agency MUST have the words "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code." or a substantially similar statement in order to project their agency as aid for bankruptcy-not settlement. They are required by law to inform the public, in writing, of any hidden fees, claims, promises, etc. Not everyone who advertises their company as a debt relief agency is what they say they are. Be forewarned.

In addition, at no time will the credit bureau post your debts as having been paid or settled. Many Creditors refuse to make any settlement, refusing to do business with most of the debt management companies, knowing these companies are not legitimate. Creditors post late payments with the credit bureau, and with every posting, your credit score decreases.
Creditors also add late payment fees up until the very moment they are paid. They do not disappear as if by magic. What does happen, however, is that Creditors will take you to court and they will win.

After interviewing two lawyers, one in California and one in Tennessee, I found that they "advised" consumers NOT to go to court when summoned, saying that they will save money on a lawyer and the associated court costs. They also advised consumers to close their bank accounts so that the Creditor may not post a lien on the account, making any future transaction impossible as the account would be frozen. Live off of cash, they said. Sell whatever property you own. Don't let them scare you. If you have nothing, they can take nothing. What they fail to say is that late payments, interest, legal fees and other fees are continuously added onto the account so that what was once manageable to repay becomes impossible to repay. They also fail to inform consumers of bank policies in cashing large sums of money.

Banks have rules and policies to protect themselves from going bankrupt overnight. Checks in large denominations-even guaranteed Bank cashier's cheques-are "held" for five to seven days, sometimes longer for out of state checks from little known banks. This means one may make a deposit into an account, but no cash can be withdrawn until the check "clears" and the money has been successfully transferred to said account. No one may cash checks over $5,000 without waiting awhile for it to clear. Taking the money and running away is not even possible.

It is not improbable that a Creditor may attempt to scare and intimidate you into making a foolish mistake. If you find yourself in a touchy situation, always seek advice. Never accept advice from someone-even a lawyer-if it sounds the least bit fishy. If the advice you receive sounds too good to be true, it probably is. Research what you need to know. Never accept advice from someone who is a stranger to you until you have done your homework, discovering for yourself when he repeats the very facts you have studied. For all you know, he could be a serial killer or a scam artist.

Remember, no one has the ability to force you into anything you do not wish to do. Always seek to be honest with your creditors, replying in letter format of your intentions, the method of payment at a lower amount than they want, and negotiate in your best interests, not theirs. If you choose to have a lawyer handle your financial affairs, you should refer them to your lawyer. Do not attempt to handle any communications by yourself. Keep accurate records, and be aware that no one is exempt from being fooled. Become familiar with the Fair Debt Collection Act, what is allowed and what is prohibited. Protect yourself.

Sources:

http://doney.net/bra/528.htm
http://www.washingtonpost.com/wp-dyn/articles/A14479-2005Mar30.html
http://www.totalbankruptcy.com/learn_about_chapter_7_bankruptcy.htm
http://en.wikipedia.org/wiki/Baby_boomer#Impact_on_history_and_culture
http://www.debtsteps.com/debt-collection.html