There are credit loopholes and secrets that can get rid of some debts, improve your credit profile, and even your overall credit score. However, most people don’t know about the phrases that can fix your credit and erase your debts.
Related resource: CreditRepair.com
Once being in over $120,000 of debt myself, I had to figure out ways to decrease our debt as quickly as possible. In some cases, we paid off debt and in others, we negotiated it down. Then, I heard about another method of getting rid of debt from a public radio show on NPR called This American Life.
How I Learned about this Credit Secret
The episode called Magic Words touched on fashioning a statement in court that could potentially cancel out certain types of debt in a judgment situation. The reporter interviewed for the story, Jake Halpern, talks about a couple who are able to elude a debt they are being sued for in court.
How are they able to do it? They utter the magic words.
Before I dish on what they are, I should give you some background so that you will know how and why these words work.
Related resource: Self Lender
Why the Magic Words Work like a Secret Loophole
According to Halpern, the initial holders of debt (the original creditors) sell off bad debts to places like debt collection agencies for pennies on the dollar. Many times, the debt is at a stage where it is very unlikely to be recouped.
Perhaps the debt is old, the person is bankrupt or there are other circumstances that make the debt bad. When the debt sale happens, the original paperwork usually does not accompany the account information of the original debtor.
The collection agency may simply get a spreadsheet with names, phone number, and amounts owed. According to most laws, unless a creditor can produce the original promissory note or loan agreements, the debt is considered as invalid and the creditor loses their right to collect on the debt.
Note: This is my layman’s summary. Talk to a lawyer if you want the real-deal legal version what to do when you are being sued in court for a delinquent debt.
When the creditor decides to sue a debtor, they are banking on a few things:
- You won’t show up to court (80%-90% of people being sued don’t even bother showing up!)
- You won’t know the magic words and therefore won’t use them to make them drop the case (and the debt claim) against you
What to Say When You are Being Sued for a Debt
Enough suspense already! What are these magic words? According to Halpern, the defendant must say something to the tune of:
Your Honor, I don’t recognize that amount. Can the plaintiff show me how they arrived to that amount for the debt I allegedly owe? I would like to see the original loan agreement I signed for that amount.
This works because most of the time, the creditor won’t have the original paperwork at their disposal! I actually have a friend whose second mortgage to the tune of $10,000 or so got canceled because of this phenomenon. It actually happens.
Before you go using this at every turn keep this in mind: it would be unethical if you know that you owe the bill in the amount they are asking for. The problem is these amounts do get padded, exaggerated and simply fabricated.
So you really should ask to see how they arrived at the amount you are being sued for. Even if it’s high and it’s true, accept it. However, accepting it doesn’t mean you have to pay it.
Try to negotiate it down if you can or find out if the statute of limitations on the debt has passed. Most times, they will settle because again, the likelihood of them getting any money was small anyway. Though we weren’t getting sued, were able to negotiate a $12,000 bill down to around $3,600. Miracles do happen.
Moral of the story: ask for evidence of the amount along with corroborating paperwork. If they can’t produce it, they can’t hold you responsible!
Related resource: CreditRepair.com
More Ways to Improve Your Credit & Dump Debt
Looking for more resources on improving your credit score?
- Visit CreditRepair.com
- Create a revolving loan with Self Lender that is reported to the credit bureaus
- Order a free credit report and dispute inaccurate information and update your personal information
- Use credit monitoring services as needed
- Become an authorized user on an account in good standing
- Open a store credit card and pay it online using the shopping cart trick
Get rid of debt and bad credit scores once and for all with these credit repair tips. Check out my free eBook, Get out of Debt:
Get Your Free eBook, Get out of Debt Now
We climbed out of over $120K in debt. Now, I am teaching people like you to do the same. Grab your copy of Get out of Debt Now today!