"Get out of debt" ads: How's it supposed to work?

[Delvo]

I keep hearing these ads on the radio for some business that says they'll get you out of debt. They actually claim that you are legally entitled to get out of debt without paying the rest of it. I don't believe it, but it makes me curious how they expect anyone to. What are we supposed to think the process is to satisfy people we owe money to, without giving them the money? What are we supposed to think is the exact wording of this miraculous loophole in the law?

[Rasmus]

That's how it works in Germany, too. I am not at all clear on the details, but basically you can declare private bankruptcy, then pay whatever you can afford for a set number of years, and afterwards you are debt free. Your creditors just have to eat their losses.

[Jaggy Bunnet]

I keep hearing these ads on the radio for some business that says they'll get you out of debt. They actually claim that you are legally entitled to get out of debt without paying the rest of it. I don't believe it, but it makes me curious how they expect anyone to. What are we supposed to think the process is to satisfy people we owe money to, without giving them the money? What are we supposed to think is the exact wording of this miraculous loophole in the law?

If you are in the UK, they may be referring to an IVA.

http://en.wikipedia.org/wiki/Individual_Voluntary_Arrangement

[cj.23]

If you owe less than £5,000, there is the Administration Order, which is usually a good way to sort things out. I have never used one, but I did work as a debt counsellor many years ago, and as far as i know this still remains legit.

However these companies usually consolidate your debts i suspect? No Idea - I would try the Citizens Advice Bureau for free advice, and see if specialist debt counselling is available.

I never had a credit rating to lose, but writing off my minimal debts seems a bit low, so I have always paid them. :( Silly of me really, as I don't think my Credit Rating would be much worse if I did default! :)

cj x

[aggle-rithm]

It's probably a case where, given a choice between getting some of the money and NONE of the money, the creditors choose to get "some".

[Just thinking]

Are they in any way connected with those that reduce your tax burden? I mean really, you owe the government $40,000 and you get off with paying only $2000?

[NewtonTrino]

There are several different things going on:

1) Credit Counselors - they help you make deals to pay your debt and eliminate some of it.
2) Bankrupty etc - You need a lawyer for this generally
3) Scams - E.g. the guys that have you use a line of credit for everything that you pay everything into and out of. Basically these are "systems" where they charge you for the knowledge or some software that "helps" you get out of debt.

I'm sure there are more variations.

[Gord_in_Toronto]

If you have any assets and you declare bankruptcy, your creditors get the assests split between them (more or less). If you sign all your assets over to me first (or pay me for my "advice" with whatever you have), then, when you declare bankruptcy, your creditors get nothing. So it's a chance to poke them in the eye one last time. :D

[The Central Scrutinizer]

If you have any assets and you declare bankruptcy, your creditors get the assests split between them (more or less). If you sign all your assets over to me first (or pay me for my "advice" with whatever you have), then, when you declare bankruptcy, your creditors get nothing. So it's a chance to poke them in the eye one last time. :D

IANAL, but I believe they can still go after them, even though you have "given" them to somone else.

[Lanzy]

They take what little money you do have, then you declare bankruptcy, no more debts. No more credit but hey.

[kakariki]

Best to avoid for-profit "debt relief" services. Do some research and you can find non-profits that will do the things that will aim you at getting out of debt.

Some of these for-profit outfits just do debt consolidation where you make one payment to them and they can get pretty hardnosed to make sure you pay that one big payment monthly.

[blutoski]

I keep hearing these ads on the radio for some business that says they'll get you out of debt. They actually claim that you are legally entitled to get out of debt without paying the rest of it. I don't believe it, but it makes me curious how they expect anyone to. What are we supposed to think the process is to satisfy people we owe money to, without giving them the money? What are we supposed to think is the exact wording of this miraculous loophole in the law?

I think you'd have to provide an example of the ad, and let us know what country you're talknig about at least.

[Gord_in_Toronto]

IANAL, but I believe they can still go after them, even though you have "given" them to somone else.

Me neither (the lawyer part). But the answer most likely is, "it depends". I'll wait for a real lawyer to show up to delineate the dependencies. :D

[JEROME DA GNOME]

I recommend paying for what you have purchased.


When one leaches from those that one owes, that is in reality leaching from all of society. The business that one owes but does not pay still transfers that debt into higher prices for those that do pay.


:gnome:

[Dunstan]

Me neither (the lawyer part). But the answer most likely is, "it depends". I'll wait for a real lawyer to show up to delineate the dependencies. :D

There's two basic weapons for the creditor here.

One is fraudulent transfer law. I think most common law jurisdictions have some version of this. Basically, any transfer of assets that is (1) made for the purpose of avoiding or defrauding creditors; OR (2) made without sufficient consideration in return and while the debtor was insolvent, is a fraudulent transfer. The creditor can sue the transferee to have the transfer voided and for other damages (including, potentially, punitive damages). Basically, this deals with classic dodges like "house? I don't own a house. Oh, this house? It belongs to my best friend Bob. Gave it to him last week."

The second is voidable transfers. Under U.S. Bankruptcy law, transfers made shortly before bankruptcy can be voided and the proceeds gathered into the bankruptcy estate to be available for distribution to all creditors. The idea here is to prevent debtors from paying off their "favorite" creditors on the eve of bankruptcy. I don't know if other countries have something similar, because U.S. bankrupcty law tends to be distinctive.

[XBoxWarrior]

When one leaches from those that one owes, that is in reality leaching from all of society. The business that one owes but does not pay still transfers that debt into higher prices for those that do pay.


:gnome:

That sounds exactly like the Republican Heath Care (sic) program. Just go to the Emergency Room and then skip out on the bill, sure you usually wait way too long to get to the doctor...and the bill is thousands instead of $65.00. But if you can't pay $65, who cares if it's $1650.00?

The people with the providers eat all the cost in the end!

[JEROME DA GNOME]

That sounds exactly like the Republican Heath Care (sic) program. Just go to the Emergency Room and then skip out on the bill, sure you usually wait way too long to get to the doctor...and the bill is thousands instead of $65.00. But if you can't pay $65, who cares if it's $1650.00?

The people with the providers eat all the cost in the end!


You must ask the question: Why is the bill so high?

Could it be that the system is being leached by non-producers?


:gnome:

[a_unique_person]

I keep hearing these ads on the radio for some business that says they'll get you out of debt. They actually claim that you are legally entitled to get out of debt without paying the rest of it. I don't believe it, but it makes me curious how they expect anyone to. What are we supposed to think the process is to satisfy people we owe money to, without giving them the money? What are we supposed to think is the exact wording of this miraculous loophole in the law?

If it's anything like Australia, these invariably end up being companies that will take whatever assets you have left and send you even more in debt.

[Rocko]

Me neither (the lawyer part). But the answer most likely is, "it depends". I'll wait for a real lawyer to show up to delineate the dependencies. :D

Yeah, in the UK at least - you're right, they can. There's laws in place to prevent people doing exactly that. Disposals of property in anticipation of bankruptcy can be reversed; so can sales at undervalue etc. I think I'm right in saying you can even set aside payments made to one creditor over another that should have been preferred.

If the adverts the OP referred to were in the UK, as was pointed out above, they're probably referring to IVAs these days. It's a lot harder for an individual to declare bankruptcy here than it used to be. The basic premise is that someone goes and speak to all your debtors, and arranges for interest etc to be stopped accruing. You then pay back a set amount every month for a set period of time. When that period comes to an end, the balance is written off. The idea is it lets the debtor get back on their feet, avoids bankruptcy, and the creditors gets a reasonable percentage of their debt back without having to pursue court proceedings etc etc.

It also means they have to shoulder some of the burden, which in theory should encourage them to take a more responsible approach to handing out increased overdrafts etc to customers they should know are in difficulty.

There's also the consolidation companies; if you owe a lot to multiple creditors, it can work out cheaper to take out a single loan, pay off all the smaller debts, and then just pay back that single large one.

[Delvo]

Dangit, I was going to make a point of listening to the ads today to take note of the company's name & website so I could answer your questions about it (and maybe look up their explanation online if they have one), but once I was in the car, one of my CDs started playing and I just got stuck on that for as long as I was driving, so I didn't hear the radio at all today.

I'm in the USA. I thought I had filled that in when I joined this site, but now I see that it isn't visible... off to investigate that...