7 ms·

Debt Strike and Debt Forgiveness - Debt Strike /Kick-Stopper

38 points by jchrisa 14y ago

redslazer 14y ago
Why if lenders are willing to sell the debt at cents to the dollar, dont they just offer that deal directly to the person who is in default? They may be able to earn more that way.
- jmaygarden 14y ago
  You could ask the same question about why restaurants don't give away their leftover food directly to customers. It sets a bad precedent from their point of view.
- corkill 14y ago
  Often the person in default is not willing to make any more payments, they have essentially given up on paying off the debt or they may feel the loan is unfair. The larger reason is that collecting debts becomes a lot harder if consumers know that the lender will just reduce what they owe if they hold out.
- ThomasGokey 14y ago
  But wouldn't this be great? I think it would be fantastic if we could some how organize so that people could buy their own debts for pennies on the dollar. It seems difficult for several reasons. Collection agencies often have a wide range of flexibility and can almost always get rid of the ridiculous fees that are added for missing payments. Most of the time they're just trying to figure out how much they can realistically bleed out of someone and go for that. A well informed person should be able to cut a deal with a collector, but if you're in that situation you've already had your credit ruined.
- smsm42 14y ago
  AFAIK, they kind of do. If you are in default and not paying big credit card bill for significant time, for example, there are chances they'd agree to close it for much less than payment in full. Maybe not cents on dollar, but significantly less than 100%. I wouldn't recommend this as a way to get rich though :)
dkrich 14y ago
This is interesting but I don't think it would work for student debt because it is guaranteed by the Federal Government, thus giving the lender no incentive to sell the debt at a discount.
- anonymoushn 14y ago
  This is the main problem I see. It's easy to do this with credit card debt, but there's no point to doing it with credit card debt because the borrower can default with essentially no consequences.
- Retric 14y ago
  Some people dodge Student loan debt by leaving the country. Think about it, owe 400k and it may seem vary appealing.
- ThomasGokey 14y ago
  Student debt is different. Because it is backed by the federal government there is no incentive for private lenders to sell defaulted debt. In fact they end up making even more money off of defaults. There are some student loans that are made outside of the federal government's system, and these can be bought and sold. These are usually made under highly predatory circumstances like for profit scam schools. We are looking at other ways to forgive student debt. I don't know much about it yet so I shouldn't say anything. It might not pan out, but I'm looking into it.
rdl 14y ago
While you can forgive debts you've purchased, and report that on the credit account, it doesn't help credit scores -- only precludes bad things from collection activity by the others who might have purchased the debt. I guess you can choose not to report a collection account on the credit report, which would help, but I think most of the time people negotiate to remove paid collection accounts on payment of a reduced debt settlement. The original creditor (OC) continues to report payment history on the original account tradeline. This will include, 30, 60, 90+ day late, and account closed/charge-off. Stopping future collection actions might be worthwhile, but once your credit is already ruined, it's often worth just waiting out the 7 years from date of original delinquency to have the entire account fall off the credit report. Credit card debt sold at 10% is probably close to the 7 year mark already. The only way I've seen anyone really fix credit is to either dispute items for accuracy (getting them to drop), or writing a goodwill letter to the original creditor, offering full payment, explaining mitigating circumstances, and requesting deletion of the entire account from credit reports. I actually had a few very small bills go >90 days late (I wasn't getting mail while overseas, and a wire transfer got sent to savings vs. checking..), and when I found out ~6 months later, my credit score had dropped a lot. I was able to write to the creditors and get them to fix it all.
- joe_the_user 14y ago
  Doesn't that mean that paying a collection agency is a waste of time also?
  - Retric 14y ago
    Why do you think they pay 10% of the face value of debt. It's pure harassment vs payment.
  - rdl 14y ago
    Yes, generally. Unless they're going to actually take legal action against you, the generally correct thing to do is send them a polite letter, not affirming the debt, requesting that under FCPA all communications be in writing. If it's <$10k, the odds they'll do anything are exceptionally low. If it's $10-100k, it really depends. >$100k, maybe there will be a lawsuit. Child support, tax debt, HOA dues, student loans, secured debt, etc. are all different, but unsecured consumer debt (credit cards) is really unlikely to result in effective collection actions. Assuming you have money, you should pay the original creditor in full in exchange for getting the entire thing removed; then, provide documentation of that to the collections agency, which then can't report on your credit (or, show it to the credit bureaus if they don't respond); FCPA covers all of this in detail. If you can't pay, it's probably not worth paying the collections agency. (This is of course not legal advice; I'm not a lawyer.)
mmphosis 14y ago
By buying up peoples' debt, and clearing their credit history, then they are free to run up yet more debt. I really don't care if people don't pay off onerous debts. And, I could care less about credit ratings which are total bunk anyways -- I've seen people's dogs get credit card applications. I don't think it is ethical to mortgage your great grandchildren. I think it was the Mayans that used to wiped out all debts every 52 years. I really feel that it would be beneficial to once again make usury illegal. What is the purpose of doing this? Other than giving away your money to creditors, what is the benefit? As long as the debt was not onerous, I could see benefit in paying off peoples' homes if it was about to be foreclosed, and they had no means to continue making payments.
- deleted 14y ago
  [deleted]
- deleted 14y ago
  [deleted]
- smsm42 14y ago
  You mean making charging interest illegal at all - so nobody can buy anything on credit and nobody does any lending? I think it makes sense except for a small thing where it would kill all modern economy, all retal sales, all manufacturing and pretty much all business which runs on credit everywhere. But as long as you're fine with trading wampums and playing with couple of sticks and a pinecone instead of your new shiny iPhone, it looks like a good suggestion. Or maybe you mean only banning charging "excessive" rates - when the real rates that are not excessive but proper are set by the Central Committee? As we all know how well do all the Central Committees in managing economic matters, you can imagine what that would lead to.
  - ThomasGokey 14y ago
    In most societies there have been some form of "release valve" to keep everyone from ending up in permanent debt. Without such release valves everyone would end up as slaves to one person (or a very small group of people). When this happens you get a very unstable social order and it usually results in some form of a revolution. In many societies this release valve has taken the form of a jubilee or large scale debt forgiveness at set intervals of time. This did two things: First it released people from debt bondage. Second, it forced lenders to lend responsibly. If they could not realistically foresee the debt being repaid before the next Jubilee they wouldn't make the loan. We've seen modern day Jubilees when it comes to 3rd world debt. We've also seen national Jubilees in Iceland and Saudi Arabia recently within the last year. In our society bankruptcy is supposed to serve this function. Unfortunately congress rewrote the bankruptcy laws in 2005 at the behest of the credit card companies (it was a lobbyist for Visa who actually wrote the law!) and the big banks. Under the new law it's much more difficult to get one's debts discharged and almost impossible to get student loans discharged. This legislation was literally bad for 99.9% of all Americans. The fact that it got passed is one more bit of evidence that the 99% don't really have representation in our current government. I think a Jubilee of some form would be an excellent development.
zred 14y ago
One thing that should be noted: if the debt is forgiven, the IRS counts it as income for tax purposes. As such, if you buy $5,000 worth of debt for $150 and forgive the debt, that $5,000 generally gets added onto their gross income. http://en.wikipedia.org/wiki/Cancellation_of_Debt_(COD)_Income http://en.wikipedia.org/wiki/Cancellation_of_Debt_(COD)_Inco... Taxes are complicated enough that I wouldn't presume to say that this applies in all or most cases, but it's something to be aware of. I was only aware of it due to a USA Today article a while back mentioning it (http://www.usatoday.com/money/perfi/taxes/story/2012-03-02/irs-taxes-on-forgiven-debt/53357844/1 http://www.usatoday.com/money/perfi/taxes/story/2012-03-02/i...). It's something to think about if you're interested in this topic.
- ThomasGokey 14y ago
  My understanding is that this is different than a COD. From the perspective of the credit reporting agencies it will be considered the same thing as paying the debt in full. From the perspective of the government it will just look like someone paid their debt, not that they got extra money. But I'm not a tax expert or lawyer, this is just my best understanding after talking to a lot of people about it.
  - smsm42 14y ago
    I'd suggest you hire one, because it certainly looks like what IRS would consider income. If somebody - no matter who - forgives a loan for you, it is considered income. Otherwise nobody would pay any income tax as they would not have any income - they'd just have some loans that by some miracle are regularly forgiven. Every employer would have a loan forgiveness program instead of salary. I don't think IRS can be cheated as easily as that.
grinich 14y ago
Interesting connection: The Point was founded by Andrew Mason before he started Groupon. http://www.thepoint.com/doc/about http://www.thepoint.com/doc/about
ThomasGokey 14y ago
Sorry everyone, I took down the original link because I wasn't sure everyone in our conversation about debt forgiveness/debt strike would feel comfortable having a wider audience read it. But I've added all the relevant info about our project below. We'll be launching it soon and could use your help spreading the word when we do. I also welcome any feedback/criticism that you might have. Thanks. ------------- Our Story The banks got bailed out and we got sold out. It’s time for a bailout of the 99% by the 99% for the 99%. Help us raise $5,000 to launch a large-scale debt forgiveness project. Banks sell defaulted charged-off debt as a commodity for pennies on the dollar. The banks make so much money charging interest and imposing fees that they don’t mind selling some debts to collectors at a significant loss provided that the debtors are financially ruined in the process. So here's our plan: We're going to raise as much money as possible, buy as much debt as possible, and then forgive the debt outright. If we can raise $5,000 we will be able to launch the project by forgiving $100,000-$500,000 worth of personal debt. This project is 100% legal. The Impact The 1% gets rich by keeping millions of hardworking people poor and in debt. Over three quarters of all Americans are in debt and one out of every seven is currently being pursued by a debt collector. Debt Fairy liberates people from some of their debt by forgiving it outright. But the real impact will come through non-cooperation with our own oppression. Nonviolent direct action searches for the point of contact between our lives and the unjust systems which exploit us. One point of contact can be found every month when we dutifully pay the banks money they didn’t earn. The 1% could not exploit us without our cooperation. If millions of us organized to refuse to pay our debts we could bring this unjust system to a grinding halt and demand real changes. Go to the Occupy Student Debt Campaign and sign the Debtor’s Pledge of Refusal. Other Ways You Can Help Spread the word! Educate yourself about how debt works and how we can liberate ourselves from debt by fighting back. Attend a GA at your local occupation and join a working group. FAQ Q. Is this legal? A. Yes. After the savings and loan crisis in the 1980’s the government made it legal to buy and sell debt as a commodity. As the legal owner of this debt the Debt Fairy has the legal power to forgive this debt. Q. Can you forgive my debt? A. Unfortunately there is no way to seek out a specific person and buy their debt. Before purchasing the debt there is very limited information as to whose debt it is. The Debt Fairy is a playful creature and liberates people out of the blue. Q. Can the Debt Fairy forgive student debt? A. No. The government guarantees student loans made by private lenders like Sallie Mae which means that these private lenders will always make a profit no matter what and have no incentive to lend responsibly or to sell these debts at a discounted rate. Sometimes a private lender will lend directly to a student in excess of the amount that the government will guarantee. This usually happens under highly predatory circumstances like for-profit scam schools such as the University of Phoenix. It is somewhat hard to find, but this highly predatory kind of student loan can be purchased and forgiven. However, we are looking in to other ways we might be able to aquire and forgive student loans. We'll keep you posted. Q. But shouldn’t we all pay our debts? Isn’t it unfair to forgive some people’s debt? A. The 1% can always get their debts forgiven, even as they rewrite the laws to make it nearly impossible for the 99% to get out from under their debt. The 1% profits without working by keeping the rest of us in debt. The undemocratic system the 1% have built is unfair and unjust. The Debt Fairy is a small intervention to set people free from from their debt and give them a fresh start. Debt refusal or a debt strike is a way to directly confront the whole unjust system and replace it with a just system. Q. Who/what is the Debt Fairy? A. The Debt Fairy is a mysterious, anonymous, magical creature who playfully liberates people from their debt.
SkyMarshal 14y ago
Whole thread was deleted, submission link just redirects to group's main page now. Ah... http://news.ycombinator.com/item?id=4000244 http://news.ycombinator.com/item?id=4000244 Assuming it's legal, awesome hack.

38 points by jchrisa 14y ago

Why if lenders are willing to sell the debt at cents to the dollar, dont they just offer that deal directly to the person who is in default? They may be able to earn more that way.

jmaygarden 14y ago
You could ask the same question about why restaurants don't give away their leftover food directly to customers. It sets a bad precedent from their point of view.
corkill 14y ago
Often the person in default is not willing to make any more payments, they have essentially given up on paying off the debt or they may feel the loan is unfair. The larger reason is that collecting debts becomes a lot harder if consumers know that the lender will just reduce what they owe if they hold out.
ThomasGokey 14y ago
But wouldn't this be great? I think it would be fantastic if we could some how organize so that people could buy their own debts for pennies on the dollar. It seems difficult for several reasons. Collection agencies often have a wide range of flexibility and can almost always get rid of the ridiculous fees that are added for missing payments. Most of the time they're just trying to figure out how much they can realistically bleed out of someone and go for that. A well informed person should be able to cut a deal with a collector, but if you're in that situation you've already had your credit ruined.
smsm42 14y ago
AFAIK, they kind of do. If you are in default and not paying big credit card bill for significant time, for example, there are chances they'd agree to close it for much less than payment in full. Maybe not cents on dollar, but significantly less than 100%. I wouldn't recommend this as a way to get rich though :)

dkrich 14y ago

This is interesting but I don't think it would work for student debt because it is guaranteed by the Federal Government, thus giving the lender no incentive to sell the debt at a discount.

anonymoushn 14y ago
This is the main problem I see. It's easy to do this with credit card debt, but there's no point to doing it with credit card debt because the borrower can default with essentially no consequences.
Retric 14y ago
Some people dodge Student loan debt by leaving the country. Think about it, owe 400k and it may seem vary appealing.
ThomasGokey 14y ago
Student debt is different. Because it is backed by the federal government there is no incentive for private lenders to sell defaulted debt. In fact they end up making even more money off of defaults. There are some student loans that are made outside of the federal government's system, and these can be bought and sold. These are usually made under highly predatory circumstances like for profit scam schools. We are looking at other ways to forgive student debt. I don't know much about it yet so I shouldn't say anything. It might not pan out, but I'm looking into it.

rdl 14y ago

While you can forgive debts you've purchased, and report that on the credit account, it doesn't help credit scores -- only precludes bad things from collection activity by the others who might have purchased the debt. I guess you can choose not to report a collection account on the credit report, which would help, but I think most of the time people negotiate to remove paid collection accounts on payment of a reduced debt settlement. The original creditor (OC) continues to report payment history on the original account tradeline. This will include, 30, 60, 90+ day late, and account closed/charge-off. Stopping future collection actions might be worthwhile, but once your credit is already ruined, it's often worth just waiting out the 7 years from date of original delinquency to have the entire account fall off the credit report. Credit card debt sold at 10% is probably close to the 7 year mark already. The only way I've seen anyone really fix credit is to either dispute items for accuracy (getting them to drop), or writing a goodwill letter to the original creditor, offering full payment, explaining mitigating circumstances, and requesting deletion of the entire account from credit reports. I actually had a few very small bills go >90 days late (I wasn't getting mail while overseas, and a wire transfer got sent to savings vs. checking..), and when I found out ~6 months later, my credit score had dropped a lot. I was able to write to the creditors and get them to fix it all.

joe_the_user 14y ago
Doesn't that mean that paying a collection agency is a waste of time also?
- Retric 14y ago
  Why do you think they pay 10% of the face value of debt. It's pure harassment vs payment.
- rdl 14y ago
  Yes, generally. Unless they're going to actually take legal action against you, the generally correct thing to do is send them a polite letter, not affirming the debt, requesting that under FCPA all communications be in writing. If it's <$10k, the odds they'll do anything are exceptionally low. If it's $10-100k, it really depends. >$100k, maybe there will be a lawsuit. Child support, tax debt, HOA dues, student loans, secured debt, etc. are all different, but unsecured consumer debt (credit cards) is really unlikely to result in effective collection actions. Assuming you have money, you should pay the original creditor in full in exchange for getting the entire thing removed; then, provide documentation of that to the collections agency, which then can't report on your credit (or, show it to the credit bureaus if they don't respond); FCPA covers all of this in detail. If you can't pay, it's probably not worth paying the collections agency. (This is of course not legal advice; I'm not a lawyer.)

mmphosis 14y ago

By buying up peoples' debt, and clearing their credit history, then they are free to run up yet more debt. I really don't care if people don't pay off onerous debts. And, I could care less about credit ratings which are total bunk anyways -- I've seen people's dogs get credit card applications. I don't think it is ethical to mortgage your great grandchildren. I think it was the Mayans that used to wiped out all debts every 52 years. I really feel that it would be beneficial to once again make usury illegal. What is the purpose of doing this? Other than giving away your money to creditors, what is the benefit? As long as the debt was not onerous, I could see benefit in paying off peoples' homes if it was about to be foreclosed, and they had no means to continue making payments.

deleted 14y ago
[deleted]
deleted 14y ago
[deleted]
smsm42 14y ago
You mean making charging interest illegal at all - so nobody can buy anything on credit and nobody does any lending? I think it makes sense except for a small thing where it would kill all modern economy, all retal sales, all manufacturing and pretty much all business which runs on credit everywhere. But as long as you're fine with trading wampums and playing with couple of sticks and a pinecone instead of your new shiny iPhone, it looks like a good suggestion. Or maybe you mean only banning charging "excessive" rates - when the real rates that are not excessive but proper are set by the Central Committee? As we all know how well do all the Central Committees in managing economic matters, you can imagine what that would lead to.
- ThomasGokey 14y ago
  In most societies there have been some form of "release valve" to keep everyone from ending up in permanent debt. Without such release valves everyone would end up as slaves to one person (or a very small group of people). When this happens you get a very unstable social order and it usually results in some form of a revolution. In many societies this release valve has taken the form of a jubilee or large scale debt forgiveness at set intervals of time. This did two things: First it released people from debt bondage. Second, it forced lenders to lend responsibly. If they could not realistically foresee the debt being repaid before the next Jubilee they wouldn't make the loan. We've seen modern day Jubilees when it comes to 3rd world debt. We've also seen national Jubilees in Iceland and Saudi Arabia recently within the last year. In our society bankruptcy is supposed to serve this function. Unfortunately congress rewrote the bankruptcy laws in 2005 at the behest of the credit card companies (it was a lobbyist for Visa who actually wrote the law!) and the big banks. Under the new law it's much more difficult to get one's debts discharged and almost impossible to get student loans discharged. This legislation was literally bad for 99.9% of all Americans. The fact that it got passed is one more bit of evidence that the 99% don't really have representation in our current government. I think a Jubilee of some form would be an excellent development.

zred 14y ago

One thing that should be noted: if the debt is forgiven, the IRS counts it as income for tax purposes. As such, if you buy $5,000 worth of debt for $150 and forgive the debt, that $5,000 generally gets added onto their gross income. http://en.wikipedia.org/wiki/Cancellation_of_Debt_(COD)_Income http://en.wikipedia.org/wiki/Cancellation_of_Debt_(COD)_Inco... Taxes are complicated enough that I wouldn't presume to say that this applies in all or most cases, but it's something to be aware of. I was only aware of it due to a USA Today article a while back mentioning it (http://www.usatoday.com/money/perfi/taxes/story/2012-03-02/irs-taxes-on-forgiven-debt/53357844/1 http://www.usatoday.com/money/perfi/taxes/story/2012-03-02/i...). It's something to think about if you're interested in this topic.

ThomasGokey 14y ago
My understanding is that this is different than a COD. From the perspective of the credit reporting agencies it will be considered the same thing as paying the debt in full. From the perspective of the government it will just look like someone paid their debt, not that they got extra money. But I'm not a tax expert or lawyer, this is just my best understanding after talking to a lot of people about it.
- smsm42 14y ago
  I'd suggest you hire one, because it certainly looks like what IRS would consider income. If somebody - no matter who - forgives a loan for you, it is considered income. Otherwise nobody would pay any income tax as they would not have any income - they'd just have some loans that by some miracle are regularly forgiven. Every employer would have a loan forgiveness program instead of salary. I don't think IRS can be cheated as easily as that.

grinich 14y ago

Interesting connection: The Point was founded by Andrew Mason before he started Groupon. http://www.thepoint.com/doc/about http://www.thepoint.com/doc/about

ThomasGokey 14y ago

Sorry everyone, I took down the original link because I wasn't sure everyone in our conversation about debt forgiveness/debt strike would feel comfortable having a wider audience read it. But I've added all the relevant info about our project below. We'll be launching it soon and could use your help spreading the word when we do. I also welcome any feedback/criticism that you might have. Thanks. ------------- Our Story The banks got bailed out and we got sold out. It’s time for a bailout of the 99% by the 99% for the 99%. Help us raise $5,000 to launch a large-scale debt forgiveness project. Banks sell defaulted charged-off debt as a commodity for pennies on the dollar. The banks make so much money charging interest and imposing fees that they don’t mind selling some debts to collectors at a significant loss provided that the debtors are financially ruined in the process. So here's our plan: We're going to raise as much money as possible, buy as much debt as possible, and then forgive the debt outright. If we can raise $5,000 we will be able to launch the project by forgiving $100,000-$500,000 worth of personal debt. This project is 100% legal. The Impact The 1% gets rich by keeping millions of hardworking people poor and in debt. Over three quarters of all Americans are in debt and one out of every seven is currently being pursued by a debt collector. Debt Fairy liberates people from some of their debt by forgiving it outright. But the real impact will come through non-cooperation with our own oppression. Nonviolent direct action searches for the point of contact between our lives and the unjust systems which exploit us. One point of contact can be found every month when we dutifully pay the banks money they didn’t earn. The 1% could not exploit us without our cooperation. If millions of us organized to refuse to pay our debts we could bring this unjust system to a grinding halt and demand real changes. Go to the Occupy Student Debt Campaign and sign the Debtor’s Pledge of Refusal. Other Ways You Can Help Spread the word! Educate yourself about how debt works and how we can liberate ourselves from debt by fighting back. Attend a GA at your local occupation and join a working group. FAQ Q. Is this legal? A. Yes. After the savings and loan crisis in the 1980’s the government made it legal to buy and sell debt as a commodity. As the legal owner of this debt the Debt Fairy has the legal power to forgive this debt. Q. Can you forgive my debt? A. Unfortunately there is no way to seek out a specific person and buy their debt. Before purchasing the debt there is very limited information as to whose debt it is. The Debt Fairy is a playful creature and liberates people out of the blue. Q. Can the Debt Fairy forgive student debt? A. No. The government guarantees student loans made by private lenders like Sallie Mae which means that these private lenders will always make a profit no matter what and have no incentive to lend responsibly or to sell these debts at a discounted rate. Sometimes a private lender will lend directly to a student in excess of the amount that the government will guarantee. This usually happens under highly predatory circumstances like for-profit scam schools such as the University of Phoenix. It is somewhat hard to find, but this highly predatory kind of student loan can be purchased and forgiven. However, we are looking in to other ways we might be able to aquire and forgive student loans. We'll keep you posted. Q. But shouldn’t we all pay our debts? Isn’t it unfair to forgive some people’s debt? A. The 1% can always get their debts forgiven, even as they rewrite the laws to make it nearly impossible for the 99% to get out from under their debt. The 1% profits without working by keeping the rest of us in debt. The undemocratic system the 1% have built is unfair and unjust. The Debt Fairy is a small intervention to set people free from from their debt and give them a fresh start. Debt refusal or a debt strike is a way to directly confront the whole unjust system and replace it with a just system. Q. Who/what is the Debt Fairy? A. The Debt Fairy is a mysterious, anonymous, magical creature who playfully liberates people from their debt.

SkyMarshal 14y ago

Whole thread was deleted, submission link just redirects to group's main page now. Ah... http://news.ycombinator.com/item?id=4000244 http://news.ycombinator.com/item?id=4000244 Assuming it's legal, awesome hack.