The ABCs of Getting Out of Debt : Turn Bad Debt Into Good Debt and Bad Credit Into Good Credit

213 Pages·2013·0.96 MB·English

THE ABCs OF GETTING
OUT OF DEBT
Turn Bad Debt into Good Debt
and Bad Credit into Good Credit
GARRETT SUTTON, ESQ.
The ABC’s of Getting Out of Debt reveals the strategies for avoiding and
overcoming bad debt, as well as using good debt to your advantage. Clearly
written and featuring real-life illustrative stories, as well as contributions from
Credit Expert Gerri Detweiler, this very useful book provides the necessary
knowledge to navigate today’s challenging credit environment.
The ABC’s of Getting Out of Debt will teach you to: • Beat lenders at their
own game • Repair your own credit • Deal with debt collectors • Take charge of
your finances • Avoid credit scams
• Win with good debt
**~
“The absolute best book for clearing up your credit and moving forward.”
Robert Kiyosaki “Garrett Sutton’s can-do lesson is an excellent lesson on how to
rise above debt.” Audio File “I strongly recommend that every consumer reads
this book.” Curtis Arnold, Founder of CardRatings.com
**~
This publication is designed to provide competent and reliable information regarding the subject
matter covered. However, it is sold with the understanding that the author and publisher are not engaged in
rendering legal, financial, or other professional advice. Laws and practices often vary from state to state and
country to country and if legal or other expert assistance is required, the services of a professional should be
sought. The author and publisher specifically disclaim any liability that is incurred from the use or
application of the contents of this book.
Copyright © 2004, 2012 by Garrett Sutton, Esq. All rights reserved. Except as permitted under the
U.S. Copyright Act of 1976, no part of this publication may be reproduced, distributed, or transmitted in
any form or by any means or stored in a database or retrieval system, without the prior written permission
of the publisher.
Published by RDA Press
An imprint of BZK Press, LLC
Rich Dad Advisors, B-I Triangle, CASHFLOW Quadrant and other Rich Dad marks are registered
trademarks of CASHFLOW Technologies, Inc.
BZK Press LLC
15170 N. Hayden Road
Scottsdale, AZ 85260
480-998-5400
Visit our Web sites: BZKPress.com and RichDadAdvisors.com
First Edition: November, 2004
First BZK Press edition: June, 2012
ISBN: 978-1-937832-41-4
~~~
Acknowledgments
First and foremost, I would like to thank Gerri Detweiler, our contributing
editor, for her valuable input, assistance and specialized knowledge, all of which
have significantly improved the content of this book. I would like to thank
Brandi MacLeod for all her efforts in shaping, reviewing and moving the
manuscript forward. As well, I would like to thank Robert and Kim Kiyosaki,
Scott Bilker and Tom Quinn for their beneficial thoughts and stories. To all,
your contributions are greatly appreciated.
Finally I would like to thank the producers, directors and prop guys of the
Universal Pictures’ released film “Wanted,” starring Angelina Jolie and Morgan
Freeman. Your choice of this book to help shape James McAvoy’s character was
a brilliant bit of casting.
~~~
Contents
Foreword by Robert Kiyosaki – I Love My Credit Cards
Part One—Credit and Debt
Chapter One – An Introduction to the Credit System
Chapter Two – The Psychology of Debt
Chapter Three – Health Effects of Debt
Chapter Four – Beat the Lenders at Their Own Game
Chapter Five – Debt Consolidation
Chapter Six – Getting Help
Part Two—Emergency Measures for Crisis Debt Situations
Chapter Seven – Car Loan Troubles
Chapter Eight – Mortgage Troubles
Chapter Nine – Student Loans
Chapter Ten – When You Owe Taxes
Chapter Eleven – Military Matters
Chapter Twelve – Debt Collectors
Part Three—Great Credit
Introduction
Chapter Thirteen – Credit Reports
Chapter Fourteen – Credit Scores
Chapter Fifteen – Credit Repair
Chapter Sixteen – Common Credit Report Problems
Chapter Seventeen – Scams
Chapter Eighteen – Winning With Credit
Appendices:
Appendix A – Sample Letters
Appendix B – Worksheets
Appendix C – Resources
About the Author
References
~~~
Foreword
by Robert Kiyosaki
I Love My Credit Cards
In the late 1980’s, I went to a seminar on financial success. The instructor, a
young charismatic speaker, went on and on about the perils of debt, saying
repeatedly, “Debt is bad. Debt is your enemy. Get out of debt as soon as you
can.” Looking around the room at approximately fifty attendees, I could see
most heads were nodding in agreement.
Just before the break, the young speaker asked, “Okay, are you ready to cut
your ties with the bondage of debt?” Most attendees nodded. “If you are ready to
break the bonds, then stand, get out your credit cards, and hold them up high so
everyone in the room can see them.” Most of the class stood immediately while
there were several people, like me, who were looking around waiting to see if we
should follow or not. Slowly, everyone stood, myself included. I figured that
since I had paid money and invested this much time, I might as well go along
with the process to see what I could learn. As I held my gold credit card in front
of me, a smiling assistant handed me a pair of scissors. As I grasped the scissors,
I knew what was to happen next. “Okay, class, cut your credit cards in half,”
said the instructor. As I heard the sounds of scissors cutting through plastic,
there were actually several cries of shock, some groans, and even a few people
crying. After cutting my card in half, I just stood in silence, mostly numb,
waiting for some form of educated enlightenment to sweep over me. Nothing
happened. I just felt numb. Although I had been in credit card trouble in the late
1970’s, when my nylon and Velcro wallet business was caving in on me, I did
eventually clean up my debt and had gone on to use my credit cards more
responsibly; hence I did not have the same cathartic reaction some people in the
class seemed to have when they cut their cards in half.
In less than a week, my replacement card had arrived in the mail and I was
happily on my way, using my gold card again. Although I did not have a
blinding cognition after cutting my credit card, the process did make me more
aware of how much of a problem credit, primarily its use and abuse, can be in a
persons’ life. Today I watch many so-called financial experts saying the same
things that young instructor was saying years ago, such things as “Get out of
debt.” “Cut up your credit cards.” “Put your credit cards in the freezer.” The
problem I have with much of their advice is that they tend to blame the credit
card as the problem, rather than the lack of financial control and financial
education of the card user. Blaming one’s credit card for their financial woes is
much the same as me blaming my putter for my high golf score.
Credit and debt are very important subjects in anyone’s life. Today, young
people while still in school are actively solicited by credit card companies,
which have often caused me to ask, why don’t we teach young people about
money in school? Why do we have to wait till young people are deeply in credit
card debt and in debt due to school loans before we realize there is a problem? If
you ask most young people, “What is the difference between credit and debt?” I
doubt many could tell you the difference, and yet we let financial profiteers
educate our youth.
Consumer debt has exploded in the United States and in countries around the
world. In 1990, the U.S. consumer was $200 billion deep in credit card debt. In
2008 it rose to over $957 billion, and has now adjusted downward to over $800
billion, a huge number nevertheless. That does not include the national debt –
the U.S. is the largest debtor nation in the world – nor the debt many financial
institutions have exposure to worldwide. As we have learned, you can’t extend
easy credit forever. When the world calls its loans, when people and
organizations are not able to pay their bills and credit becomes tight, huge
financial problems surface, which ultimately affect our individual credit card
balances.
So are debt and credit bad, as so many financial experts say? Absolutely not.
Debt and credit are powerful financial tools that have allowed many in the world
to enjoy the highest standard of living in history. Without debt and credit, we
would not have such things as great cities, massive industries, airlines flying us
to all parts of the world, resorts to relax at, excellent food at exciting restaurants,
new cars to drive, comfortable homes to live in, and so many choices of
entertainment.
So if debt and credit are not bad, then what is? In my opinion, lack of
financial education and fiscal responsibility are bad. I think it tragic that my
parents’ generation, the World War II generation, has left massive debt for my
generation; and my generation, the Vietnam era generation, has done the same to
our kids. In other words, while personal credit card abuse is irresponsible, the
massive bill each generation passes on to the next generation is even more
irresponsible.
How young people born in the new millennium will pay for multiple
generations of fiscal irresponsibility, I do not know. One way to keep paying for
all this debt is to keep expanding credit and encouraging people to spend more
and more. The June 28, 2004, issue of Time magazine ran an article about
schools now sending kids on field trips to shopping malls, car dealerships,
supermarkets, and fast-food outlets. Why? One reason is that our cash-strapped
schools cannot afford to send kids on field trips to zoos, museums, or cultural
events. Yet many businesses are ready and willing to pay for these field trips to
start grooming new customers while they are still in school. In other words, as
long as each of us keeps consuming and keeps using our credit to acquire more
debt, the economy will grow and the bills of past generations will be paid. While
this may be good for business and will help keep our credit and debt economy
afloat, to me it sounds risky and fiscally irresponsible.
The good news is that even though most of us cannot control our national
irresponsibility, we can take control of our own finances. One of the most
important lessons my rich dad taught me was the wisdom of knowing there is
good debt and bad debt. Simply put, rich dad said, “Good debt makes you rich
and bad debt makes you poor.” Unfortunately, most of the people who were
cutting up their credit cards in the financial seminar I attended only had bad
debt. Even more unfortunate was that the instructor leading the class only knew
of bad debt. He had no idea that good debt existed. To him, all debt was bad.
Bad financial education is the cause of poor financial management.
One of the reasons this book is so important is that it is important to be
financially responsible and to use the power of your credit and debt intelligently.
Before turning you loose into this book, I would like to pass on three bits of
information my rich dad taught me years ago. They are:
1. Bad debt is easier to get than good debt. If any of you have ever tried to
get a loan to buy a rental property or to start a business, you may know
how difficult it is to get a loan for investment. Yet if you want a car loan
or a new credit card, credit, debt, and money are easy to come by, even if
you have horrible credit.
2. Bad debt makes it harder to get good debt. If you have too much bad debt,
and you want to begin using the power of debt and credit more
intelligently, like for starting a business or investing in rental property, bad
debt makes it harder for you to get the good debt and hence to become