Category Archive: Debt Settlement

2015
09/02

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Debt Settlement

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Debt Settlement Agreements

(via Thenewswire.ca)

Nanton, AB / TheNewswire / August 5 2015 – Petrostar Petroleum Corporation (Petrostar or the Company) wishes to announce that company has entered into two debt settlement agreements dated July 31,2015 in order to settle an additional $55,200.00 in outstanding debt through the issuance of 1,104,000 Petrostar common shares at deemed prices of $0.05 per share.

The Company elected to complete the new debt settlement in light of its current working capital position and in order to preserve cash to fund the development of its ongoing projects. Any shares issued in connection with the debt settlement will be issued in reliance on certain prospectus and registration exemptions under applicable securities legislation and will be subject to a hold period of four months and a day. The completion of the debt settlement remains subject to the receipt of all necessary regulatory approvals, including the approval of the TSX Venture Exchange.

About Petrostar Petroleum Corp.

Petrostar is a Tier 2 Canadian-based oil and gas exploration company trading on the TSX Venture Exchange with property assets in both Alberta and Saskatchewan.

For further information, please contact:

Bruce Scafe, Director

1-877-737-8864 or [email#160;protected]

Alternate Contact.

Mackenzie Loree, CEO

1-403-861-6779 or [email#160;protected]

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

FORWARD LOOKING INFORMATION

Certain information in this news release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions. This forward-looking information includes, among other things, information with respect to the Companys beliefs, plans, expectations, anticipations, estimates and intentions. The words may, could, should, would, suspect, outlook, believe, anticipate, estimate, expect, intend, plan, target and similar words and expressions are used to identify forward-looking information. The forward-looking information in this news release describes the Companys expectations as of the date of this news release. The results or events anticipated or predicted in such forward-looking information may differ materially from actual results or events. Material factors which could cause actual results or events to differ materially from a conclusion, forecast or projection in such forward-looking information include, among others, risks arising from general economic conditions and adverse industry events.

When relying on forward-looking information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The Company has assumed that the material factors referred to in the previous paragraph will not cause such forward-looking information to differ materially from actual results or events. However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS NEWS RELEASE REPRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS NEWS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION ON AT ANY PARTICULAR TIME.

Copyright (c) 2015 TheNewswire – All rights reserved.

2015
09/01

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Debt Settlement

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MBAC Fertilizer Reports Q2 2015 Results and Provides Update on Lawsuit Claim …

TORONTO, ON–(Marketwired – August 14, 2015) – MBAC Fertilizer Corp. (MBAC or the Company) (TSX: MBC) announced today its financial results for the three and six months ended June 30, 2015 and provided an update on lawsuit claim against Itafós. All amounts, unless noted, are in US currency.

Q2 2015 HIGHLIGHTS:

  • Company continued in care and maintenance during Q2 2015, without any production.
  • In response to MBACs strategic review process, during the quarter MBAC has received non-binding indicative offers and expressions of interest from third parties, most of which are active in the fertilizer and agriculture sectors.
  • Subsequent to quarter end, the Company entered into exclusive discussions and negotiations with an investment fund active in the fertilizer industry that has submitted an offer as part of the Companys strategic review process. The offer, which involves a recapitalization of the Company, is currently non-binding and subject to a number of conditions, including debt settlement with MBACs creditors and senior lenders, a board restructuring and settlement of the Companys current liabilities.

FINANCIAL RESULTS

Q2 2015
MBAC incurred a net loss of $12.8 million or $0.07 basic and diluted net loss per share in Q2 2015. This compares to a net loss of $7.0 million or $0.04 basic and diluted net loss per share for Q2 2014.

The net loss was primarily due to finance expenses of approximately $6.9 million and Operations care and maintenance expenses of $5.4 million, which includes $5.0 million of depreciation expense. Excluding foreign exchange impact, other non-cash items and non-recurring items, MBAC had an adjusted net loss1 in Q2 2015 of $9.6 million or $0.05 adjusted basic and diluted net loss per share. This compares to an adjusted net loss of $8.0 million or $0.05 adjusted basic and diluted net loss per share in Q2 2014.

As at June 30, 2015, MBAC had cash and cash equivalents and restricted cash of $0.2 million. This compares to bank indebtedness of $1.6 million and restricted cash of $1.4 million as at December 31, 2014.

Six months ended June 30, 2015
MBAC incurred a net loss of $56.0 million or $0.31 basic and diluted net loss per share for the six months ended June 30, 2015. This compares to a net loss of $1.0 million or $0.01 basic and diluted net loss per share for the same period in 2014.

The net loss was primarily due to finance expenses of approximately $19.5 million, unrealized foreign exchange loss of $17.6 million and Operations care and maintenance expenses of $12.8 million, which includes $10.3 million of depreciation expense. Excluding foreign exchange impact, other non-cash items and non-recurring items, MBAC had an adjusted net loss1 for the first half of 2015 of $35.9 million or $0.20 adjusted basic and diluted net loss per share. This compares to an adjusted net loss of $13.4 million or $0.08 adjusted basic and diluted net loss per share for the first half of 2014.

MBACs Financial Statements and Management Discussion and Analysis (MDamp;A) for the six months ended June 30, 2015 are available on www.sedar.com and from the Companys website, www.mbacfert.com.

UPDATE ON LAWSUIT CLAIM AGAINST ITAFÓS
The proposed auction to sell certain assets of Itafós, which had been originally scheduled for June 30, 2015, was suspended by the judge of the Superior Court of Brasilia, following injunctions filed by the Company and certain lenders, as disclosed in the Companys press release dated June 15, 2015.

The labor judge of the State of Tocantins has decided to reinstate the action that places certain of Companys fixed and non-fixed assets (valued at approximately US$2.7 million) in escrow and has ruled that the assets be sold by way of auction on September 3rd, 2015. These assets however are pledged to Itafós lenders as part of the security package under the Companys project loan financing. As a result, the company and its lenders continue to work to stop the auction.

The Company wishes to advise that it continues its efforts towards reaching a definitive agreement with authorities and employees, that it will continue to defend its claims, and that it will provide updates on legal activities as material developments occur.

About MBAC
MBAC is focused on becoming a significant integrated producer of phosphate fertilizers and related products in the Brazilian market. MBAC has an experienced team with significant experience in the business of fertilizer operations, management, marketing and finance within Brazil. MBAC owns and operates the Itafós Arraias SSP Operations which consists of an integrated fertilizer producing facility comprised of a phosphate mine, a mill, a beneficiation plant, a sulphuric acid plant, an SSP plant and a granulation plant and related infrastructure located in central Brazil (Itafós Operations). The Itafós Operations are estimated to have production capacity of approximately 500,000 tonnes of SSP per annum. MBACs exploration portfolio includes a number of additional exciting projects, which are also located in Brazil. The Santana Phosphate Project is a high grade phosphate deposit located in close proximity to the largest fertilizer market of Mato Grosso State and animal feed market of Pará State. Further information on MBAC can be found on the Companys website at www.mbacfert.com and on SEDAR at www.sedar.com.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements related to activities, events or developments that the Company expects or anticipates will or may occur in the future, including, without limitation, statements related to the Companys expectation that it will be successful in its strategic process, the Companys business strategy, objectives and goals; the expectation of MBAC becoming a significant integrated producer of phosphate fertilizers and related products in the Brazilian markets; MBAC continuing to explore and implement initiatives to address its liquidity and capital restructuring requirements and improve cash flow generation. Forward-looking statements are often identified by the use of words such as plans, planning, planned, expects or looking forward, does not expect, continues, scheduled, estimates, forecasts, intends, potential, anticipates, does not anticipate, or belief, or describes a goal, or variation of such words and phrases or state that certain actions, events or results may, could, would, might or will be taken, occur or be achieved. Forward-looking statements are based on a number of factors and assumptions made by management and considered reasonable at the time such statements are made, and forward-looking statements involve known and unknown risks, uncertainties and other factors may cause the actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Such risk factors include, among others, the Company not becoming a significant integrated producer of phosphate fertilizers and related products in the Brazilian markets; MBAC not being successful in continuing to explore and implement initiatives to address its liquidity and capital restructuring requirements; not being able to obtain additional funds and not being successful in its strategic process; not being able to improve cash flow generation as well as those factors disclosed in the Companys current Annual Information Form and Managements Discussion and Analysis, as well as other public disclosure documents, available on SEDAR at www.sedar.com. Although MBAC has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate. The forward-looking statements contained herein are presented for the purposes of assisting investors in understanding the Companys plans, objectives and goals and may not be appropriate for other purposes. Accordingly, readers should not place undue reliance on forward-looking statements.

1 Adjusted for the exclusion of certain non-cash and non-recurring items. Please refer to the Q2 2015 MDamp;A filed on www.sedar.com for a reconciliation of the Non-IFRS measures.

Shares Outstanding: 181,607,492
Fully Diluted: 221,612,672

2015
08/27

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Debt Settlement

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ON THE MONEY: Managing your debt, Part II

Let#x2019;s assume that you are in debt up to your eyeballs; creditors are calling demanding payment, and you can see no way out of the morass that you are in. Is there any action to can take to begin to crawl out of the debt hole that you find yourself in?

First things first, my advice is not to use a debt consolidation or debt settlement firm to resolve your situation. Remember that a debt consolidation firm is a for-profit concern, unlike a consumer counseling firm, which is usually nonprofit.

A debt settlement firm will tout that they can negotiate with lenders and reduce the amount of debt that you owe. In fact, creditors will sometimes refuse to work with these companies.

2015
08/19

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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.

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2015
08/17

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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.

2015
08/16

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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.

Bankruptcies

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.

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2015
08/16

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Debt Settlement

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How Do I Get My Money Back from Morgan Drexen?

Question:

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.

Answer:

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.

2015
05/29

Category:
Debt Settlement

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Heeding the Lessons of the FTC Case Against DirecTV

Robby H. Birnbaum is a shareholder in the regulatory group at Greenspoon Marder. He focuses extensively on regulatory practices for credit counseling and debt settlement agencies, marketing and advertising regulation and regulatory compliance. David Schnobrick is a law clerk in the litigation group at Greenspoon Marder.

2015
05/13

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Debt Settlement

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Biz News:

Our experience here in Orange County has been incredible, the announcement said. We met amazing people, lived wonderful experiences and learned a lot. We owned our first cars, tried to learn how to surf, spent some time in the desert. And we saw the most beautiful sunsets on the ocean. But were creatures of the cold.

Costa Makers held its grand opening in September, calling itself a human-scale collaborative space ideal for designers, illustrators, bloggers, writers, photographers and developers. It also featured handmade decor and furniture that were found in flea markets or bought from artists.

*

Costa Mesa debt services firm files for bankruptcy

Morgan Drexen Inc. of Costa Mesa, a debt-settlement and bankruptcy services company, filed for Chapter 7 bankruptcy liquidation last week.

In its bankruptcy filing, the company estimated it has 1,000 to 5,000 creditors, $8 million in assets and $9.9 million in liabilities. It reported that its revenue declined last year to $22.89 million from $34.66 million in 2013.

The bankruptcy filing came the day a federal judge in Santa Ana froze the companys assets on request of the US Consumer Financial Protection Bureau, which sued Morgan Drexen in 2013, seeking $90.7 million in restitution for about 60,000 consumers who the agency alleges were illegally charged upfront fees for debt-settlement services they didnt receive.

2015
05/13

Category:
Debt Settlement

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Beth’s Story: Which Debt Solution Did She Choose?

This series is largely based on my five-day email exchange with an actual reader, Beth (not her real name), who submitted detailed personal information.

This final piece focuses on all three of the options to resolve debt that I have discussed in the three previous articles with her so far credit card consolidation, negotiating debts for less and bankruptcy. It is in this final piece that she makes her decision.

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Weighing the Options

Here’s Beth’s email:

Michael, I cant thank you enough for your answers. I spent the whole weekend reading your articles.

[Card issuer 1] brought up the blp (balance liquidation plan) and settlement in my 2nd and 3rd calls, and I havent called [card issuer 2] and [card issuer 3] to see what they say. My payments are all due this week but I want to save the money for the settlement and not pay another outrageous interest fee, however if I were to settle now I wouldnt be able to make the payments in 90 days, I need 5-6 months, with that being said Im seriously considering not making my payments this month, what are your thoughts?

Ive never been late my whole life, but it seems a step back I need to take in order to move forward. I feel stuck in this situation where I cant settle now and pay in 3 months but I also dont want to make another payment paying interest when I could save the money towards the settlement. That leaves me with 1 option I didnt want and thats the no payment/late payment.

Im still looking into the Chapter 7 bankruptcy, but finding a good attorney is an issue, also I just moved from Utah to Florida 2 months ago and spent many months overseas in the last 2 years when I was unemployed and I was making the minimum payment, so when it comes time to meet with a judge I dont know if that would be an issue.

My reply back to Beth:

Your credit card interest rates are not all that outrageous. I see them regularly at twice the 13% average you have. But they are flat-out unaffordable given your current circumstances and the temporary income situation.

I would be a little surprised if you were able to get a good settlement from the card issuers in the early months of having missed payments. You say you need 5 to 6 months to be able to fund settlements. That is currently the amount of time suggested to go (when your credit card payments are not being made), to get to the most reasonable and flexible bank policies and targets for negotiating your debt.

It is not for me to tell you to stop paying your credit cards. I can say that you generally will not reach favorable settlement outcomes when you are current, or only barely behind with payments.

You mention being stuck where you cannot settle now and pay in 3 months. But that is what I am saying too. You generally cannot do that. Your payments generally need to be late more than 90 days, and often more than 150 days late, but not yet 180 days late, in order to optimize your results. It is sometimes better to settle certain accounts even later than 180 days.

In other words, it is not only OK that you have to wait several months without paying before you are prepared to settle the credit cards, it is actually how it works best.

I really do like the Chapter 7 option for you. You are fortunate to be in a position to legitimately consider the three mainstream options for resolving problem debts with credit card consolidation, debt negotiation and bankruptcy. I am not sure why you would be having a hard time locating an experienced bankruptcy attorney? You can do a bankruptcy attorney search by city or zip code; or use your local phone book. If it were me, I would not make my final decision to negotiate these bills down until I talked with at least one attorney about Chapter 7 bankruptcy.

Seeking Professional Guidance

Next, Beth commits to do what I find of major importance for virtually everyone I come in contact with whom needs a form of outside intervention to get relief from crushing debt. That is: calling professionals who offer no-cost consultation and who can provide detailed information about their flavor of debt relief.

Beth wrote back to say:

I called the hotline and an attorney is supposed to call me in a couple of days. Bankruptcy makes me feel uncomfortable, the whole thing about the 7-10 years on my report and everything else is intimidating for someone who has always kept payments current and had financial control their whole life up until 2-3 years ago. It sounds like bankruptcy would save me more than the other options and would be life saving, very tempting indeed, however Im afraid there will be long-lasting consequences. Giving my info over the phone was already intimidating let alone the attorney and the whole process that follows.

Im not sure if I should call the credit card consolidation counselor in the meantime or wait for the attorney first. I did call [card issuer 2] for the first time today, and they basically suggested me to be late at least a month and they would contact me to offer options. So Ive decided that Im not going to pay any of my cards this month. They also said to call a consumer credit counselor to see if they can help me.

To which I responded:

I completely understand your being anxious about talking about any of this with a bankruptcy attorney, or a credit counselor. It is normal to feel that way. But I can tell you it is also pretty normal to feel a sense of relief when you do talk things over with a professional from each of the mainstream debt relief options.

You will consult with the bankruptcy attorney, where I am confident you will be able to dispel some of the concerns you have about filing. You may choose not to file chapter 7, but that decision will be an informed one, which is what I believe people in this spot owe themselves.

I would call a credit counselor. The counseling agency you call about consolidating your credit cards is not as important as choosing the right debt negotiator, or attorney. Using a nonprofit agency to consolidate your bills into one lower payment (with lower interest rates and typically less than a five-year payoff plan), is really a matter of what you can qualify for, which all agencies can quote you and get within a couple dollars of each other. I would make that call as soon as possible, and with the mindset that you are gathering information, not enrolling in the debt management plan they will quote.

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Working Through the Confusion amp; Fear

Beth wrote me back a brief message I have not included here because it rehashed much of what we covered in earlier parts of this article series. She admitted she had been reading so much that she was perhaps a little confused about her options.

I have found some confusion to be pretty normal at the beginning of the information gathering process. Especially if you are grabbing information from many different online resources and/or getting feedback from different people in your own circle of influence (friends and family).

Beth has yet to talk with a credit counselor, or a bankruptcy attorney, and also expressed some remaining confusion about the debt settlement process. She also finally fell in line with nearly all early-stage debt intervention consultations I have ever done, where she expressed sincere concerns about her credit scores and reports.

I am including much of my response to Beth, as it will hopefully drive home some important details.

I wrote back and said:

I know you have read so much to date, but I really think you need to read the following carefully.

Start with this article where I answer the question – What is debt settlement? Yes, it is the basics, but this is just the start. It’s part of an entire series on settling with your original creditors.

You have come up with the wrong impression of settling your credit cards in the time frame of being one to two months late. That is not going to happen. You need to wait typically until after your fifth payment has been missed in order to get the deals you need so that you can afford to pay them or even for some credit card banks’ last-ditch policies to kick in allowing you to settle at all.

About the damage settling debt does to your credit report it is probably worse than you read about, and also not the big deal you read about. Here is an article about how your credit reports can bounce back after settlement.

Your credit scores take a hit, but recover in quick order (all things considered). I see many credit recoveries within two years of completing your settlements. (You can see how your debts are affecting your credit scores by checking them for free on Credit.com.)

This is not about your credit scores, though. This is about the affordability of your debt. Something has to give, and it will be your credit score. Simply put, you cannot afford to finance anything right now anyway, and when you are back on firm financial ground, credit and financing options will be available, or can be planned for.

Making the Decision

And finally, the last two emails Beth and I exchanged.

She wrote:

Im going to follow your instructions and read the articles tomorrow just like you said. I understand that in my bad situation I need to focus on getting rid of the debt more than on my credit score.

I just called [card issuer 2] and they offered me 0% for 5 years:

2 cards combined = $11,035 currently min payment = $247, but could become 0% 5 years = $185.

Im still leaning towards settlement but the question now is:

o Do I miss payments for about 3-5 months and then negotiate a settlement? And let late payments impact my score, or

o Do I take the 0% for 5 years offer for now and in a few months negotiate a settlement? I would be saving a little and it goes toward my balance but I also understand Im wasting money making payments when in reality my plan is settlement later.

To which I responded:

You could likely get the five-year plans from all three of your particular credit cards at either zero interest, like [card issuer 2] offered, or really close to it. You could enroll in the plans and run a tight budget until your work situation is more stable. But like you pointed out, that is $500 set aside for four months. That is $2,000 ready to deploy toward what could turn out to be the better path, settlement or bankruptcy, a few short months from now.

All of your specific creditors tend to offer hardship and balance liquidation plans for the first 30 to 60 days of nonpayment (even longer from time to time). You do not need to decide on that right away.

Hard Choices May Ultimately Be the Better Ones

Beth is in a financial situation that would be a whole lot different if her employment were reliable. I am encouraging Beth to look more seriously at debt negotiation and bankruptcy than credit card consolidation for two reasons:

  1. Statistically speaking, she would be better suited to one of those options instead.
  2. In more than 20 years, I’m saddened by the people I see who waste money and time on what they perceive to be the better path to take, but whom ultimately never took the time to get informed about any other alternatives.

Hopefully this series drives home that there is a need to research and get informed, and also to reach out and talk to professionals in the different debt relief options out there.

More on Managing Debt:

  • 5 Tips for Consolidating Credit Card Debt
  • The Best Way to Loan Money to Friends amp; Family
  • Top 10 Debt Collection Rights

Image: iStock

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