Prosperity Coaching Paula Langguth Ryan Obstacles on the Way Out of Debt

Transcript of the I Hate Debt radio show with
Host: Tom Allen
Guest: Paula Langguth Ryan
Segment 2

I’m Tom Allen, and I hate debt. I invite you to make the decision today to join with me in living a debt free and prosperous life. Rich people get rich because they have a team of financial advisors. They make their own decisions, but they always get good advice. When it comes to getting out of debt, you can get good advice too. Paula Ryan, a highly successful prosperity coach and author of "Bounce Back from Bankruptcy", helps people turn their financial lives around, and she’s here to help you. Paula, once you’ve decided to turn your financial life around, you’re likely to encounter some obstacles on the way out of debt. In your counseling with people, what kind of obstacles are people encountering nowadays?

Paula: People get caught in things that seem completely insurmountable. For example, there’s the insurance trap: if you have bad credit, you can’t get insurance. If you can’t get insurance, then you have all these medical bills to pay. If you have all these medical bills to pay, then all your money is going to that, and you get bad credit. You get into this cycle. Aggressive creditor tactics is my worst nightmare.

Tom: My experience is that creditors are getting more aggressive and they are going after older and older debts.

Paula: Oh yes, and they are charging for everything! They are now charging if you go onto their phone system to get your account balance—they now charge you!

Tom: It’s incredible.

Paula: Anything they can do to make a profit. My first advice to everyone who’s in debt would be, if you decide to start setting aside money in savings, you should invest your money in the credit card companies or the banks that own your credit cards.

Tom: (laughs)

Paula: I’m serious! You might as well make the 27% profit that they are making every year, while you are paying the 27% interest.

Tom: Isn’t that the truth!

Paula: At least offset your interest payments.

Tom: I hadn’t even thought about that. These guys are huge financial institutions, they are worth billions of dollars, and—

Paula: --and they want to make money for their shareholders. But the more aggressive they get, the more empowering you need to be. Which is why, when I coach people, one of the things I teach them is the three empowering moves to overcome aggressive creditor tactics.

Tom: And what are those?

Paula: The first one is kind of an odd one: Let go of your attachment to the outcome.

Tom: Very good!

Paula: If you’ve got a vested interest in the creditor doing a certain thing for you, then you are going to wind up hitting a brick wall.

Tom: The creditor doesn’t take it personally.

Paula: No! They are reading from a script, it’s their job. It’s not about you, it’s not about your debt, it’s “can I collect on this so I can get the bonus so I can take the cruise to the Bahamas?”

Tom: I guess one of the things they have going for them is they talk to us, who are emotionally involved. I guess if you could imagine that you are handling this account on behalf of someone else, then you can let your emotions calm down and not let the personal attacks get under your skin, and have a better chance of getting a good negotiation with them.

Paula: Oh yeah, because one of the things that we have is an attachment to our credit reports, and they milk that. They use that as a hot button about you: “you’re ruining your credit report.” If you call them on it right up front, if you take their phone call and say, “No, I don’t have a payment for you” or “Yes, it’s going to be late” or “This is all you’re going to get from me; not what you wanted from me this month, but what I can actually pay you,” and then, before they can even say it, you say, “I know you’re going to have to put a mark on my credit report. You do what you need to do because I know that my credit report is just a piece of paper. And when I get my debt paid off, then I will decide that if I want to borrow money for a car or a mortgage, I will know how to proceed with that, regardless of what my credit report says.” And that will completely catch them off guard, completely throw them off balance, and they will have no idea how to respond to that.

Tom: Well, I think one thing that people don’t really know is that bad information will stay on your credit report for seven years from the date of last activity, which is generally your last payment.

Paula: Right.

Tom: So if you had a bill that was, for example, four years old, it would fall off your credit report in three years—

Paula: --if you don’t make another payment.

Tom: And if you do make a payment, then it’s going to stay on for seven more years.

Paula: And when an item gets close to that seven-year mark, then creditors you haven’t heard from in years come out of the woodwork, or their collection agencies do, because they are desperate for you to get that clock started again. So if you have a debt you haven’t paid on in a number of years, go back and look at the last time you paid on that, and if you’ve only got three years left to go, or less, before that seven years is up, I’d suggest you let it go. Don’t go bankrupt on debts like that. If you can wait three years out, if you’re not going to need a new car or mortgage or something, you’re better off waiting it out and just letting it go.

Tom: And of course, there’s also the statute of limitations, which gives the creditors the right to sue you. Most states have statutes of limitations that are far less than seven years. So if, for example, the debt is four years old, it may be past your state’s statute of limitations—they couldn’t even sue you, all they could really do is ask you to pay.

Paula: Yes, you really need to know your rights, and your website has some fabulous stuff on that, so I strongly recommend that people go to your site to get that information on what their rights are in their state.

Tom: Thank you!

Paula: You’re welcome! And one of the other things I tell people to do with their creditors is “Give your creditors what they want.” I’m not talking about that outrageous, budget-stretching, budget-busting amount they want you to give, I’m talking about giving them contact. If you have creditors that are hounding you every day or multiple times during the day, here’s what I recommend you do: you make a list of your creditors and their phone numbers, you call them every single day—every single one of them—and this is what you say, “Hi, this is Joe Smith with account number such and such, and I’m just calling you today to let you know I won’t be sending a payment today, and I’ll call back tomorrow to let you know about tomorrow. So mark my account, please, right now to show that I called today.” Do not engage in any other conversation. If they start going off, just say your piece again.

Tom: But that’s not going to keep you off of their automated calling lists.

Paula: Actually, it does! Because the automated calling list is based on who they haven’t heard from. So after a week or two, when they see that you are going to call them every single day and say, “Hey, I sent you 42 cents today, please mark my account that I called and I will call you again tomorrow and let you know if I’m sending anything tomorrow. Thanks, have a great day, bye.”

Tom: Interesting.

Paula: That’s all they want is contact with you.

Tom: Well that’s why I’m glad that you’re here, because I always learn something when I talk to you! This is fabulous. What other kinds of things would you tell people on how to deal with their creditors?

Paula: A lot of people get caught in that trap of thinking if they can’t pay everybody something, then they’re not going to pay anything. Or if they can’t pay them what they want, then they’re not going to pay anything. Just look through your spending plan: go through what you are spending and where you are spending it, just mark it down and figure out what you have available to give to creditors every month. I don’t care if it’s $50, $10, anything. And then make a list of your creditors, and decide what percentage that debt is of your overall debt. Say you’ve got $50 a month to pay towards creditors.

Tom: Okay.

Paula: And you owe $50,000, and $10,000 of that is owed to one creditor, so that’s 20% of your debt, right?

Tom: Sure.

Paula: So you give them 20% of the $50. So they’d get $10 a month—they want $160 a month, but they’re going to get $10 a month. It’s my super debt-buster strategy. And every month you pay them that, no matter what, no matter if they are charging you $40 in interest, you send them $10 every month. It shows that you’re making an attempt, and what it does psychologically for you is that now all of a sudden you see that you are paying your creditors, and this burden just lifts from you.

Tom: Okay.

Paula: It’s an amazing psychological edge.

Tom: Now I would say that if you can come up with more than the $50 in your example, I would say to try to apply it to one creditor.

Paula: Absolutely. If you have a yard sale or something, or you come into a little bit of money, go with the one that’s either got the highest interest rate, or the one with the lowest balance, whichever makes YOU feel like you’re making progress.

Tom: So the one that you want to get rid of first.

Paula: Exactly. The highest interest rate is going to be your best, but since it’s the one with the hugest balance, you’re not going to SEE a difference, so it might feel like you’re dragging. So if you take the one with the lowest balance, go with that.

Tom: You may actually be better off paying the smallest one because you can get it out of the way—

Paula: That’s right, and you free up that money to pay the other creditors.

Tom: That’s right, you won’t then have that minimum monthly payment to pay.

Paula: Yes. And also, look to see where you might be out of integrity with your finances. This is an advanced prosperity step. Then take a step forward toward getting into integrity. If you know you owe someone something, don’t make excuses about it, or why you haven’t paid them, don’t get mad at them. Too often we get angry at the person we owe because it’s easier to justify our inaction in paying them if we’re mad, than it is to actually take the step toward it.

Tom: I would only say, go ahead and get mad if it helps you focus yourself on the solution.

Paula: I have a client who was actually out of integrity with her money from way back when—she owed a landlord. She actually just got this fabulous consulting job and all of a sudden it got pulled out from under her, it was delayed indefinitely. I said, “Are you out of integrity anywhere?” She said, “Oh my Lord, I owe this landlord.” She cleared it up and the contract was reinstated.

Tom: In our next segment we’re going to be talking about making a commitment to stay out of debt. Stay tuned. Paula Ryan of artofabundance.com will be right back. For more information on getting and staying out of debt, visit IHateDebt.com. I’m Tom Allen, and I hate debt.

Read the transcript of Paula's next segment Seven Debt-Free Commitments

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