Monthly Archives: August 2015




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Texas Legislature Imposes Statutory Subordination of Real Estate Mortgages to …

The explosive growth of oil and gas leasing and drilling in the Barnett Shale play turned an issue that had always been a nuisance for the oil and gas industry into a significant problem. When an oil and gas producer takes a mineral lease from a mineral owner (who may or may not own surface rights), that lease is subject to the rights of all prior grantees of the mineral owner, including any holders of mortgages. Of course, if the oil and gas lease precedes the mortgage, the mortgage is subject to the lease, and the issues discussed below do not arise. (Note, this discussion assumes timely recordation of all instruments in the real property records.) When the mortgage precedes the lease, the oil and gas producer would seek a subordination of the mortgage to the oil and gas lease from the holder of the mortgage. With a subordination, if the mortgage is foreclosed, the lease will remain in effect. Without a subordination, a foreclosure of the mortgage will negate the oil and gas lease.

Historically, many lenders were happy that their borrowers would have the possibility of royalty income as an additional source of funds with which to repay their loans and, as a result, would readily grant such subordinations. However, with the urban drilling boom in the Barnett Shale, many leases cover only residential subdivision lots (roof top leases), a large percentage of which were subject to mortgages when the leases were taken. The situation was further complicated by the sale of these mortgages by the mortgagee as securities managed by service companies, many of which knew nothing about the oil and gas industry. Securing subordination agreements became difficult, and in some cases practically impossible. As a result, instead of being an occasional inconvenience, resolving this issue became a major title curative problem which, if not overcome, created a significant title risk.

To address this issue on behalf of the industry, the 84th Regular Session of the Texas Legislature passed and Governor Abbott signed House Bill 2207 adding Chapter 66 to the Texas Property Code. The statute becomes effective on January 1, 2016. The author of the bill was James L. Keffer, a Republican from Eastland.

The statute deals with the following situation: An oil and gas lease is taken on the mineral estate in land that is already subject to a mortgage. Subsequently, the mortgage is foreclosed. In that situation, the statute provides that the oil and gas lease does not terminate, even if the lease had not been subordinated to the mortgage. The buyer at the foreclosure sale takes its interest in the land subject to the oil and gas lease. As such, the statute creates a legislatively imposed subordination of the prior mortgage to a subsequent oil and gas lease.

The statute goes on to provide that although the oil and gas lease survives the foreclosure, any right on the part of the oil and gas producer to use the surface of the land based upon the terms of the oil and gas lease terminates with that foreclosure. This loss of surface use may not be a problem under a roof top lease, but would be a serious problem under leases covering larger tracts and, indeed, any tract on which oil and gas wells have been or are being drilled.

The statute not only applies to mortgages executed in the future, but also undertakes to limit retroactively the rights of mortgage holders under existing mortgages.

Oil and gas producers holding these leases will benefit from the legislatively imposed subordination. If nothing else, they will save the substantial time, effort, and cost that was being invested in securing subordinations. However, producers will have to be aware of the potential effect on surface rights. Lenders to landowners who own part or all of the mineral estate and whose land is mortgaged to support the loans are burdened by this statute. The rights of those lenders are limited. Landowners may find that the statute is an impediment to borrowing in some circumstances. On the other hand, lenders to oil and gas producers whose loans are secured by mortgages on the producers oil and gas leases are benefited. Those lenders mortgages are less vulnerable to loss from foreclosure of prior mortgages granted by the lessors of the producer/borrowers oil and gas leases. Again, however, the effect of the surface use provisions of the statute on oil and gas producers can adversely affect the value of those lenders collateral.


Pay Day Loans


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Stella Creasy claims ‘attacks by cybernats’

She went on: “I’m a very robust person and while it’s not happened for a couple of months, if I’m targeted by cybernats seriously I’ll report it to the authorities.”

Creasy said that she had deleted and blocked most of the posts that she described as ‘sexist and abusive’, some of which were made in the run up to the General Election in May, and last year’s independence referendum.

And Creasy, who is well known for a campaign against excessive APR rates charged by some pay day loans firms, suggested cybernats may begin to target her more if she is elected as deputy Labour leader next month.

She tweeted in December last year that she had experienced a “Twitter stream full of abuse from cyber nats for expressing support for Scottish Labour”.




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Study: New Jersey has highest rate of distressed mortgages in U.S.

New Jersey continues to have the highest rate of distressed mortgages in America, according to data from the Mortgage Bankers Association.

The MBAs National Delinquency Survey for the second quarter of 2015 showed that 10.2 percent of residential mortgages in the state are in a state of serious delinquency, meaning that they are in foreclosure or at least three months behind on payments, reported. In comparison, the national rate is 3.95 percent.

Related story: New Jersey starts HomeSaver program to help families in foreclosure

New Jerseys woes come despite overall positive growth for the nations housing market.

The Mortgage Bankers Associated said that the percentage of houses in serious delinquency in America is at its lowest rate since 2007.

Nearly every state in the nation reported declining foreclosure inventory rates over the second quarter, reflecting a nationwide housing market recovery and strong job market that provide opportunities for distressed loans to be resolved rather than be put into foreclosure, said MBA analyst Marina Walsh.

The states with the highest percentage of loans in foreclosure were New Jersey, New York and Florida.

Walsh also noted that the majority of troubled mortgages are legacy loans. Seventy-three percent of seriously delinquent mortgages originated from before 2008.




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1 in 10 NJ mortgages are still in trouble, data shows

New data shows that one in 10 New Jersey residential mortgages are still in trouble, eight years after the great recession began.

Many NJ mortgages are still in trouble

The Mortgage Bankers Associations National Deliquency Survey shows 10.2 percent of Garden State home mortgages are either in foreclosure or at least 90 days in arrears.

At 10.2 percent, the New Jersey distressed mortgage rate or DMR, is twice the national average of 3.95 percent.  And our DMR is again the highest in the nation for the seventh consecutive year.

Patrick OKeefe, director of economic research for Cohn/Reznick in Roseland, says the reasons are varied. Our state has recovered much slower from the economic turndown, and that includes the housing sector.  He also says the New Jersey housing sector was hit somewhat harder than most states in terms of the downturn, back in 2006-2009.

We are a judicial foreclosure state, which means that the courts supervise discharge of impaired mortgages. We afford ourselves more protections but it means that it takes longer to clear the foreclosure through the system, OKeefe said.

According to OKeefe, a lot of residential mortgages in trouble is a problem for the state and local neighborhoods that goes beyond just the economic numbers. He suggests that the number of pending mortgage forclosures influence price appraisals of neighboring properties. Simply stated, many times those facing foreclosure have less incentive to keep a residence in shape or even pay taxes on it.

OKeefe said the good news is the total number of mortgages in trouble has been slowly shrinking across the US and in New Jersey.

We are making progress, OKeefe said. We are just making it at a slower pace than elsewhere.


Secured Financing


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CIT Group Receives Consensus Rating of "Hold" from Brokerages (NYSE:CIT)

Shares of CIT Group (NYSE:CIT) have received a consensus recommendation of Hold from the thirteen analysts that are presently covering the stock, ARN reports. One investment analyst has rated the stock with a sell recommendation, six have given a hold recommendation and six have given a buy recommendation to the company. The average 12-month target price among analysts that have issued ratings on the stock in the last year is $50.63.

CIT Group (NYSE:CIT) traded up 2.08% on Monday, hitting $47.04. 2,168,297 shares of the stock traded hands. The company has a market cap of $8.19 billion and a price-to-earnings ratio of 7.76. CIT Group has a 1-year low of $43.21 and a 1-year high of $49.98. The stock has a 50-day moving average price of $47.17 and a 200 day moving average price of $46.17.

CIT Group (NYSE:CIT) last posted its quarterly earnings results on Tuesday, July 28th. The financial services provider reported $0.66 earnings per share for the quarter, meeting the Thomson Reuters consensus estimate of $0.66. During the same quarter in the prior year, the company posted $1.02 EPS. On average, analysts anticipate that CIT Group will post $2.79 EPS for the current fiscal year.

The company also recently disclosed a quarterly dividend, which will be paid on Friday, August 28th. Investors of record on Friday, August 14th will be paid a $0.15 dividend. This represents a $0.60 dividend on an annualized basis and a yield of 1.28%. The ex-dividend date is Wednesday, August 12th.

Several equities research analysts recently commented on CIT shares. Zacks lowered shares of CIT Group from a hold rating to a sell rating in a report on Friday. Barclays lowered their price objective on shares of CIT Group from $47.00 to $46.00 and set an equal weight rating for the company in a research note on Wednesday. Oppenheimer restated an outperform rating and set a $54.00 price target on shares of CIT Group in a research note on Wednesday. Guggenheim downgraded shares of CIT Group from a buy rating to a neutral rating in a report on Wednesday. Finally, BTIG Research reissued a buy rating on shares of CIT Group in a report on Tuesday, July 28th.

CIT Group Inc. is a bank holding company (NYSE:CIT), which provides financing, leasing and advisory services principally to middle market companies. The Company operates in two segments: Transportation and International Finance (TIF), provider of leasing and financing solutions to operators and suppliers in the global aviation and railcar industries, and North American Commercial Finance (NACF)., which consists of four divisions: Commercial Services, Corporate Finance, Equipment Finance and Real Estate Finance. Commercial Services provides factoring, receivable management products, and secured financing to businesses. Corporate Finance provides a range of financing options and offers advisory services to small and medium size companies. Equipment Finance provides leasing and equipment loan solutions to small businesses and middle market companies. Real Estate Finance provides senior secured commercial real estate loans to developers and other commercial real estate professionals.


Debt Settlement


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Companies Have Already Found A Way Around Ontario’s New Debt Settlement Law

Settle your debts! Stop collection calls! Avoid bankruptcy!

Those are the types of lofty promises made by debt settlement companies that were supposed to be a thing of the past in Ontario as of July 1.

The province’s Collection and Debt Settlement Services Act, which places strict limits on how much debt settlement companies can charge financially strapped consumers for their services, has already driven some companies out of business. But industry insiders believe others are skirting the rules by continuing to operate without a licence or partnering with law firms, which are exempt from the new legislation.

The guidelines, which took effect just weeks ago, see Ontario join Alberta, Manitoba and Nova Scotia in taking action against debt settlement companies after an increase in consumer complaints about excessive fees, misleading contracts and failures to deliver the level of debt reduction promised.

The biggest changes to the industry are the act’s ban on the collection of fees before a debtor begins paying a creditor, and its strict limits on how much companies can charge consumers trying to settle debts, capping the amount at 15 per cent.

Debt settlement companies operate in a competitive field alongside non-profit credit counselling agencies — which are funded by donations from credit card companies — and bankruptcy trustees, who earn fees of up to 20 per cent of total debt from clients.

The new laws apply only to debt settlement companies, and that has led some debt settlers to change how they operate.

Total Debt Freedom, one of the province’s largest debt settlement companies, has partnered with newly formed TDF Debt Advisory Law PC, which shares an acronym, as well as an address, phone service, and senior executive with Total Debt Freedom.

Its website states that, as a law firm, it is exempt from the legislation imposed on the debt settlement companies, including the limits on how much they can charge clients that many debt settlement firms say makes their old business models unfeasible.

Richard Cooper, CEO of Total Debt Freedom, said the decision to spin off one arm of the business into a law firm was made because the new laws make debt settlement “completely cost prohibitive to offer the same level of value and service to the client.”

“If anyone wants to pay a professional to settle their debt for them, really the only way to do that now is to hire a law firm,” he said, adding that many of his former competitors are going out of business.

A law firm for your credit card debt? An Ontario debt settlement company has set itself up as a law firm to skirt Ontarios new debt collection and settlement law, which it says is too stringent to allow the industry to survive.

Cooper said he received calls from two separate debt collection companies wanting to sell their practice to TDF because they couldn’t afford to operate under the new model.

He said prior to July 1, his firm did not charge upfront fees but did charge about 17 per cent of total debt loads.

The new laws reduce the incentive for agents to work long months to get the best deal possible for their clients, he said, because it simply won’t be worth it.

“By delaying the fee and cutting it by one-third,” he said, “there’s absolutely no way you can offer the same level of service.

“There’s very, very small margins in the area of debt negotiations, because there’s such high cost.”

Cooper said the law firm will sign a contract with the client and set up services, then the debt settlement company will take over execution of the contract, doing the “back end” work of negotiating with creditors.

Such partnerships between lawyers and debt settlement companies won’t be able to fly under the regulatory radar for long, said Mark Silverthorn, a lawyer who provides debt coaching services and blogs about the industry.

For one, he said, the law permits lawyers to engage in debt negotiations only in the normal course of business, meaning they might not be able to advertise to attract new clients. Second, the exemption applies only to “a barrister or solicitor in the regular practice of his or her profession or to his or her employees.”

Debt settlement companies are a relatively new phenomenon in Canada and — until Ontario’s new act went into effect — had not been regulated in that province..

Cambridge Life Solutions — whose spokesman was the avuncular Alan Thicke — became the poster child for abusive practices a few years ago as debtors began to complain that it was driving them further into debt rather than offering the lifeline it promised.

At the height of the debt settlement rush a few years ago, a number of companies made consumers pay their fees first and charged exorbitant monthly fees even if they failed to stop creditors from suing or harassing debtors. Many of these companies migrated north after the United States cracked down on upfront fees in 2010.

Just 10 per cent of settlement proposals that banks receive are actually accepted, according to a letter from the Canadian Bankers’ Association submitted to the Ministry of Consumer Services.

Ontario’s act was designed to end these kinds of practices by some of these companies, by requiring all debt settlement firms to obtain a licence.

Silverthorn believes, however, that some continue to operate without a licence.

He recently filed a letter of complaint to several provincial regulators about Complete Debt Solutions, whose website appears to offer debt negotiation services, but which does not show up on Ontario’s database of licensed entities.

The site’s owner, Milton Kaseke, maintains he is not operating illegally because he has been offering his services free to build up a presence in the industry and hasn’t received any fees since the site’s 2013 creation. He said he is in the process of getting a licence and only then will start charging consumers. The ministry confirmed that he has submitted an application.

A spokeswoman for Ontario’s Ministry of Government and Consumer Services said a license may be required even for companies that do not charge.

“Someone providing debt settlement services in Ontario free of charge may still be required to be registered depending on what they are doing,” Anne-Marie Flanagan said.

While he said he has sent enrolment forms to some potential customers that do include a clause to agree to a 13 per cent fee, he said has not followed up with any of those customers.

“I have helped thousands of people and I have never taken a penny from anyone,” he said.

“In this industry, you need to keep yourself clean, period.”

This chart from a May, 2015, report from CIBC World Markets shows consumer insolvencies (bankruptices plus consumer proposals) rising sharply in recent years.

Nearly a month into the new legislation, there are still a surprising number of debt settlement companies operating without a licence, which gives legitimate businesses a bad name, said Nima Taheri of Compliance First Financial Corp., which displays its licence number prominently on its website.

“We’d like to see a lot of guys that are blatantly advertising debt settlement services to be held accountable for not being licensed,” he said, adding that he hopes the new legislation will include serious enforcement.

Their business models are starkly different but Taheri, Cooper and Silverthorn all share one lingering concern: Whether the new act will entice collection agencies to engage in debt settlement. They all say this could be a serious conflict of interest.

The Collection Agencies Act officially became the Collection and Debt Settlement Services Act in January, meaning the two services are now regulated under the same act. There is nothing stopping a collection agent, with access to a debtor’s credit history, from calling a debtor on behalf of a creditor, then offering to settle other debts as well and collecting fees from both creditor and debtor.

“Piling that into the same legislation as debt negotiations doesn’t make any sense,” Cooper said, adding that the interests of collection agencies and debt settlement agencies are polar opposites.

Silverthorn points out that the disappearance of some debt settlement companies could leave a void in the market. Consumers got used to the notion that they can settle debts at a discount thanks to onslaught of ad campaigns during the late 2000s.

“If you’re a collection agency and entrepreneurial, you could make a lot of money from this.”

And collection agencies could benefit from being the first to talk to consumers about their debts, he added.

“When you are signing up to provide services to distressed consumers, the key thing is to be the first person with your oar in the water.”

He thinks Ontario will soon follow Alberta’s lead to force companies to choose either collections or settlements.

Taheri believes the wording of the act opens a very ambiguous door for collection agencies in terms of their role, but he added that creditors are unlikely to allow the firms they have hired to get as much of their money back as possible to turn around and work with a debtor.

The full impact of the changes won’t be known for several months. But with Canadians continuing to pile on sky-high levels of debt, the laws could become more important than ever.

Also on HuffPost:


Secured Financing


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TRLPC: Antares’ $13.9B buyout loan includes jumbo asset-backed credit

NEW YORK, July 31 Antares Capital is in the
market with $13.9 billion of senior secured credit facilities
backing its sale to Canada Pension Plan Investment Board (CPPIB)
from General Electric Capital Corp, which include a jumbo $10.7
billion asset-backed loan.

The financing, which will also help fund the middle market
private equity lenders future growth, is backed by Antares
portfolio of term loans and revolving credits to US middle
market companies.

The secured financing stands out due to its size, and its
asset-backed structure, which allows Antares to diversify its
funding sources in the future by issuing a range of debt
instruments via the securitization and unsecured debt markets,
according to Fitch Ratings.

It is easy to get secured financing quickly from banks,
said Meghan Neenan, a senior director at Fitch, adding that the
execution makes sense in terms of economics and efficiency.

The structure of the deal resembles a warehouse facility
used for Collateralized Loan Obligation (CLO) funds to gather
assets, Neenan said. The ratings agency expects the deal to be
termed out by issuing a series of CLO funds over time.

Middle market lenders, which include specialty finance
companies and Business Development Companies (BDCs), often issue
CLOs as one of several vehicles they use to fund investments in
portfolio companies.

Antares previously used CLOs to fund investments but stopped
after its acquisition by GE Capital due to GEs lower funding
costs, Neenan said.

CPPIBs $12 billion acquisition of Chicago-based Antares
vaults Canadas largest pension fund into the top tier of US
middle market lenders and marks GE Capitals exit as the
dominant player in that space.

General Electric Co announced plans to divest the majority
of GE Capitals assets in April, including the Antares sponsor
finance business and its US commercial lending and leasing
unit, as it seeks to minimize exposure to its finance arm amid
increased regulatory scrutiny.

Credit Suisse declined to comment and CPPIB did not
immediately respond to a request for comment.

In market

Underwriters Credit Suisse, Deutsche Bank and Citigroup are
currently syndicating the deal, which is targeting investment
grade lenders due to Antares BBB rating from Fitch.

Sumitomo Mitsui Banking Corp and Scotiabank have also signed
on as co-arrangers and co-documentation agents, sources said.
The financing launched July 27 with commitments due by August

The asset-backed loan is secured by Antares portfolio of
first-lien middle market term loans and the holding company loan
is backed by Antares portfolio of revolving credit loans,
sources said.

The $10.7 billion, seven-year asset-backed facility includes
a $3 billion asset-backed revolving credit and a $7.7 billion
asset-backed term loan. The asset-backed revolver pays 225bp
over Libor when drawn and 50bp when undrawn, sources said, and
is expected to be undrawn at closing. The $7.7 billion term loan
pays 225bp over Libor.

Its a great piece of paper for a bank buyer because the
loan is secured by a highly diversified portfolio of first-lien
loans, a banking source said.

The $7.7 billion term loan backs Antares existing portfolio
of term loans and the revolving credit can be drawn to help fund
new term loans in the future, the sources said.

The financing includes a $3.2 billion, five-year credit
facility at the holding company level, split between a $1.2
billion term loan A and a $2 billion revolving credit.

Pricing on the holding company loan is tied to a
ratings-based grid. Pricing on both tranches is 125bp over Libor
at the BBB rating level, higher at lower rating levels, said
sources. The $1.2 billion TLA will amortize at 5 percent in the
first year, 7.5 percent in the second, 10 percent in the third
and 12.5 percent in the last two years.

The $2 billion holding company revolving credit will fund
revolver draws by Antares portfolio companies, sources said.

I-grade rating

Fitch Ratings assigned a BBB expected long-term issuer
default rating and expected secured debt rating to Antares
Holdings (US LP) on July 27 with a stable outlook.

The expected ratings reflect Antares strong middle market
franchise and expansive sponsor relationships, which provide
access to ample dealflow, Fitch analysts said.

The ratings reflect Fitchs belief that Antares has a
lower-risk portfolio profile than other middle market lenders,
due to its focus on senior lending positions, lower portfolio
yields than lenders making riskier loans, low portfolio
concentrations, minimal exposure to equity investments and
strong asset quality.

Fitch said that Antares rating constraints include higher
leverage than its peers, a fully secured and relatively
undiversified funding profile, potential liquidity and leverage
impacts from portfolio companies drawing on revolving credits,
and the execution risk associated with the separation of Antares
from GE Capital.

The ratings also consider currently aggressive underwriting
conditions in the middle market lending space and the potential
for increased risk appetite as Antares expands its unitranche
lending offering, said Fitch.

CPPIB is contributing $3.85 billion in cash toward the
Antares acquisition, which Fitch said is a sizeable initial
equity investment and evidence of CPPIBs long-term strategic
plans for growth.

(Editing By Tessa Walsh and Jon Methven)


Debt Settlement


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How to Improve Your Credit Score by Negotiating With Creditors

Over time, delinquent debt is a financial hole that becomes deeper and harder to climb out of. It could be a past due credit card bill, or a car or mortgage payment. No matter how big or small, a debt left unchecked and unpaid will eventually find its way to a collection agency.

When this happens, the delinquent debt is filed on your credit report, a common problem in the US According to a 2014 study from the Urban Institute, more than one-third of Americans have a debt in collections listed on their reports.

If youre behind on bill payments, you can find ways to negotiate down your debts. Negotiating through your original creditor can help you dodge collection agencies, get rid of debt and improve your credit score.

Related: How to Find Out If You Have Debt in Collections

Improve Your Credit Score by Negotiating a Debt Settlement With Your Creditor

Delinquency is determined by how many days, weeks and months your bill is overdue. Your creditor will report this delinquency to the three major credit bureaus so it is reflected on your credit report. The longer you wait, the more damage youre likely to inflict on your credit score. The delinquency and reporting generally follows this hypothetical 180-day timeline:

  • First month: One missed payment wont be reported to the credit bureaus by your creditor or lender, but its advisable to try and make some form of payment on your bill to avoid being completely delinquent.
  • Second month: Miss two monthly payments in a row, and your delinquencies start being reported. Thankfully, you can sometimes still catch up on payments without your credit score being terribly affected.
  • Third month: Three missed payments show credit bureaus youve made a habit of skipping payments. Your FICO score is vulnerable to damage at this point, according to CardHub, and could drop as much as 100 to 125 points.
  • Fourth month: By the 120th day of non-payment, your creditor is ready to hand over your delinquent account to a collection agency. Your credit score continues to decline as collection calls become more frequent.
  • Fifth month: Another month of no payments inflicts further harm to your credit score. Debt collections continue to urge you to pay up.
  • Sixth month: Using a delinquent credit card account as an example, after 180 days of zero payments your creditor is allowed to declare your account as charged off. Nearly as bad as bankruptcy and foreclosure, a charge-off is one of the worst things you can do to your credit score.

10 Tips to Get Rid of Debt

A successful debt negotiation with a creditor can carry several financial benefits. It can lower your interest rate or create a restructured or revised payment plan that makes it easier for you to pay down your debt. Remember youre negotiating not haggling — if youre in debt, youve got to broach the topic with your creditor gently to convince them youre financially responsible and committed to tackling your debt. Keep these tips in mind to help you get rid of debt.

1. Create a Budget

Write out an itemized budget of your monthly income, your expenses and your credit accounts, including any that are delinquent. Second, gather each bill for every month youve been delinquent. If you receive paperless statements, print them out.

Not only will copies of your debts give you an idea of how much you can afford to pay back in a negotiated settlement, you can also show your creditor that youre willing to look at the dollar figures objectively and critically.

2. Be Honest

The best way to facilitate credit solutions is to employ open communication, recommended John Heath, a credit attorney. Your creditors will ask for an explanation regarding your financial troubles, so be clear and concise. Creditors will be more willing to work with you if they have a full understanding of your situation.

3. Dont Create Conflict

While it might seem like a good idea to march in with a commanding presence, any yelling, screaming, threats to sue or otherwise aggressive attitude wont do you any favors with your creditor. Stay calm, collected and ask your creditor plenty of questions. Remember, youre there to get back in their good financial graces.

4. Make Counteroffers

Go into debt negotiations with an understanding of what your financial situation is, said bankruptcy attorney Paul Kuzmickas. Remember the most successful negotiations will take more than just a day. Be ready to have offers and counteroffers.

5. Have a Plan of Action

Heath noted that after explaining your situation to your creditor, follow up with an actionable credit solution. If you cannot make your minimum payment each month, ask them to reduce the amount for a short period of time until your finances improve, he said. Reiterate that you are committed to paying off your debt and keeping your account in good standing.

6. Negotiate a Debt Settlement

Open up with a low offer — 15 to 20 percent — and aim to start your negotiations from that point. An ideal settlement will be around 30 to 50 percent of your debt. In exchange for payment, ask the creditor to remove the account from your credit report, and request a confirmation letter stating the account will be removed prior to making a payment, said Harrine Freeman, author of How to Get Out of Debt: Get an A Credit Rating for Free.

Freeman said that if the creditor refuses to comply with that request, ask them to report the account as paid or paid in full to the credit bureaus. The delinquency will still be reflected on you report, but so will the payment status.

Read: Why You Could End Up Paying for Your Forgiven Debt Anyway

7. Push for New Terms

First, ask for a lower interest rate. The modified rate on your loan or credit card bill can help you pay down your debt more easily. According to Karlene Sinclair-Robinson, an alternative financing expert, you should also make other requests to your creditor. You can ask for a reduced debt balance, payment extension, due date change or elimination of fees, for example.

8. Pay Off Your Delinquency in Full

It can be hard to muster up the cash when youre in debt, but paying off your entire delinquent payment in one lump sum can help. Depending on the amount of the debt, it’s worth paying it in full to have it removed from your credit, said Caton Hanson, co-founder of Creditera.

9. Consider Bankruptcy

If you know that paying off all your debts is going to be a struggle no matter what down the road, start exploring [bankruptcy] as an option, said Kuzmickas. Filing for bankruptcy, he said, involves wiping out your debts completely, whether through debt consolidation or a 3- to 5-year payment plan. You can eliminate many, if not all, of your non-essential bills, freeing up the money you need for rent and basic necessities. However, bankruptcy should be the very last option you consider.

10. Stay Positive

When negotiating, it’s essential to remain confident, said Jeremy Vohwinkle of Gen X Finance. The potential to feel pressured or bullied is there, but if you stay on point, you will find yourself in better shape. Remember that [creditors] aren’t entirely in control of the situation.

Related: Here’s Why It’s So Hard to Get Out of Debt

Seek Alternatives to Negotiation

If negotiations with your creditor come to an impasse, consider alternatives. Seek out a nonprofit credit counseling agency through the National Foundation for Credit Counseling to set you on the path to stamping out you debt and improving your credit score.

They can help you evaluate your budget, your debts and explain your options, which include managing on your own, a possible debt management program and in more severe debt cases, bankruptcy counseling, said Katie Ross, education and development manager for American Consumer Credit Counseling. Your best option really depends on your specific situation. The ultimate goal is to repay your debts so you can begin rebuilding your credit history.


Debt Settlement


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How to Settle Your Personal Debt

Many of us experience financial difficulties at one time or another. While most of us are strong enough to weather periodic financial storms and pay our bills, there are many who are not so fortunate. They become victims to long-time derogatory credit reporting, collection proceedings and judgments.

If you happen to belong to that hapless group, or should your fortunes turn for the worse in the future, here are some practical tips on how to mitigate your financial problems. If unable to return borrowed money due to extenuating circumstances — such as job loss, business failure, health impairment, foreclosure, etc. — you should at least attempt to settle your debts for an amount you can afford.

Most of us hear of credit counselling agencies offering services of debt consolidation, reducing your overall monthly payments. Your debts may be lumped together into one newly obtained loan, payable monthly at a lower interest rate. The problem with such an arrangement arises when you miss some of those monthly payments, finding yourself back at square one. Further defaults may escalate your money woes. Caught in a vicious circle, you may never swim out of the sea of debt.

After consulting and helping indebted clients for the past 20 years, I came to the conclusion that the most advantageous method of settling your debts is through an alternative, one-time payment settlement proposal.

One-time Payment Settlement Proposal

This is the least strenuous way of getting rid of your debts. By offering a creditor to settle for a fixed, one-time payment only, if and when accepted, youd free yourself from being tied-down to never-ending monthly payments. The amount offered to settle may be small in comparison to the overall debt but nonetheless, if you dont own a major asset such as equity in a home, expensive car, boat, or other substantial valuables, creditors may well consider such a settlement seriously.

Taking you to court to obtain a judgment costs them money, without a guarantee they could realize on it. Therefore, for the sheer purpose of dissuading your creditors to commence a legal action leading to a judgment, you should present them with your one-time payment offer in a hardship letter, along with a financial statement of affairs showing your income, assets and liabilities. After reviewing your financial statement, they may rethink suing you. That can often pave the way to settle your debts for pennies on a dollar.

Dont be persuaded to vary the amount offered for a much higher amount just because creditors pressure you to do so. Should collection calls persist, write them a short letter stating that their calling presents harassment, and request they cease and desist their unfair practices. Send a copy of that letter to the collection agencies regulator in the province where you reside.

Dont succumb to collection agents promising you peace and quiet if you make at least a minimum payment towards your debt. This is a common trick they often employ. Even a token payment towards your debt will automatically move forward the date by which they can report your bad credit to credit bureaus, usually six to seven years.

Regardless of whether your creditors accept your offer, most of your derogatory remarks with past due accounts will be deleted after that time, except for a few exceptions such as certain student loan obligations and notation of multiple bankruptcies.

Save for these exceptions, most of your debts may not be enforceable due to the expiry of the statute of limitations which kicks in two years from the date you made your last payment on a revolving loans (charge cards), or the date you are supposed to make the last payments on your instalment loans, such as car loan, etc.

Settlement After a Judgment

The very same formula applies for settlement under a judgment. You should follow the same steps as explained previously, except, you would direct your offer to settle to the creditors lawyer that obtained a judgment against you.

Although judgments may be deleted from credit bureaus in six to seven years , if unpaid, they remain to be registered with courts sheriffs offices, and prevent you from obtaining a mortgage or other major purchases for a very long time. You may be forced to offer more money to settle a Judgment and in the worst scenario, pay the whole amount of it. Thats why it is highly advisable to act on time and offer your creditors a one-time settlement offer before they take you to court and obtain a judgment.


This is the easiest way out but I dont recommend it, unless you are forced into it by a third party — such as the CRA — whose assessment you cannot pay off. Even though the discharge of Bankruptcy is purged from credit bureau files after six or seven years, it still leaves an indelible mark that may haunt you for life. A perfect example is a job application that asks the question: Have you ever declared bankruptcy? You cant lie so by checking yes, other applicants for the job will be favoured, leaving you with a lesser chance of getting hired.

In the end, I recommend you evaluate your ability to repay any loan before you obtain it. Limit yourself to only two credit cards and a banks line of credit at the most favourable rates, making sure youd be able to repay the outstanding balances when they become due.

Dont forget the old saying: You are as good as your credit.



Debt Settlement


Comments Closed

How Do I Get My Money Back from Morgan Drexen?


Dear Steve,

I entered into an agreement with Morgan Drexen for debt settlement. I paid them in excess of $3000. and they did nothing to help me. They lied to me several times regarding where my money went.

What recourse do I have?

Thank you.


Normally Id suggest you follow my guide How to Try to Get a Refund From a Debt Relief Company but the case of the debt settlement company Morgan Drexen is a different matter.

You see, Morgan Drexen was shutdown as a result of a Consumer Financial Protection Bureau (CFPB) court action. According to the Morgan Drexen website which is now under control of the Trustee in this case or CFPB, On June 19, 2015, Morgan Drexen shut down its business after a federal court ordered the company to stop collecting money for debt settlement work. The court ruled that Morgan Drexen broke the law. The company is now in bankruptcy.

But in an article yesterday, click here, I mentioned how the CFPB is interested in talking to anyone who has been approached to continue their accounts with any other firm. The CFPB advice is to contact the CFPBs Consumer Response team at (855) 411-2372.

Again, according to the confiscated Morgan Drexen website the following advice is offered to consumers:

Morgan Drexen filed for bankruptcy and went out of business after a court ruled that Morgan Drexen violated the law. Morgan Drexen is not doing any more debt settlement work. This means that you must take action and make choices about your debts. If you have one or more settled debts, Morgan Drexen will not send your payments to the creditor for you. You must begin to make your payments directly to your creditors for any debts that have been settled but not yet paid off. Please contact any creditors with whom you have settlements. Act quickly to avoid losing the reduced debt of your settlement.

For debts that were not settled, you will need to consider other options. Morgan Drexen is not in business and cannot settle these debts. You can negotiate directly with creditors, begin making payments, or consider other options such as bankruptcy. This websites Debt Resources page has free information from the federal government to help people with their debts.

To see what debts are settled and what debts are not settled, log into your account. Find information about the due dates and payment amounts for your settlements. A checklist of next steps available can help you take action and protect your rights.

A letter and email were sent to you with information about your debts and what you need to do. The worksheet of next steps was included in the letter. Please look for the letter or email from Morgan Drexen. It will tell you how to protect your rights.

Your creditors are being told that Morgan Drexen has gone out of business. We have asked creditors to work with you on your debts. If you have any questions, please visit our FAQ web page.

At this time your recourse is a bit limited. You can file a complaint with the CFPB or call them, watch your mail for information from the court regarding the Morgan Drexen bankruptcy and how to file a claim for some refund due you, and take over dealing with your creditors or find someone else to help you with your debts.

From experience, these things never work out so consumers are made whole again. Inevitably people never get but a fraction of the money they paid, back. Id be shocked if you did. However the CFPB is telling consumers to contact the attorney who was assigned to handle their account and demand whatever money back that is currently being help in a trust account on your behalf by the attorney. I think it will be a much smaller number than what you paid since fees were generally extracted from consumer deposits in advance of settlements.

What has been more alarming in the past days or week has been emails from readers claiming theyve been approach by another company to who has taken over or is now managing their account. Click here for articles about that.

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.