Most of us are aware that the current US economic system isn't working. But many of you don't realize precisely how farcical it actually is–a system of endless credit, balanced by meaningless scoring systems that are frequently subverted to fuel a larger system that can exist only on endless growth.
To illustrate how absurd the system is, you can read articles about how a NC church bought $3,000,000 worth of medical debt for about $15k. That's right: debt that was “so important” based on medical care that was “so expensive” that they had to mark it up thousands of times to burden people with the choice of physical survival or living the rest of their lives in debt slavery.
But the benefits of that absurdity are actually accessible to everyone. The reason that $3m became $15k is because it was registered/labeled (again arbitrarily, based on some rando $15/hr collector's assessment) as “uncollectable debt.”
Credit card debt, medical debt, even [private] student loan debt: when it's deemed uncollectable the very same companies that harrass and threaten you will just say “oh well” and settle for fractions of pennies on the dollar. Because when you have a completely automated system and all decisions are based purely on the bottom line, getting anything is always better than getting nothing. Even if you're only getting $100 on a $10k “uncollectable” debt. So these companies will do literally just that.
But it doesn't end just there–the companies that buy the uncollectable debt will get what they can and sell it onward for even cheaper….and so it goes down the line. This is the real trickle down theory they didn't teach you about in schools.
So the guys who buy your $10k credit card debt for $1k are happy to settle your $10k debt for $1500 once they're convinced they can't squeeze anythign else out of you. Wow! You paid off your $10k debt for $1500!! Not a bad deal!
But what if you waited even longer? Well they paid $1k for your $10k debt note–and now they realize they can't collect on it…so they'll sell it to another collection agency for $100.00. That's right: now the legal owner of your debt is happy to take $250.00 to settle your $10k debt.
Why would they do this? Because this is mega-corporation bottom line economics. Individuals are only valuable when they are aggregated together with tens of thousands of other individuals. So an individual by themself is worthless–and re-cooperating value or losing value on that one customer is utterly meaningless to:
- the person collecting your debt;
- the manager of that person collecting your debt;
- the ceo of the company collecting your debt;
- the company that's collecting your debt;
In other words: not only is walking on your debt meaningless–but so is paying on your debt. And not only is it meaningless: but it is amoral. Robots and systems cannot be moral arbiters, nor can they be morally transgressed against–and that is who/what you're interacting with here.
So how does this affect you?
It means that if you ignore your debt (and the debt collectors) long enough, then your debtor (whoever that may be now) will settle your debt for pennies on the dollar. Wait it out, and you'll win.
Here are some caveats & warnings:
- Federal student loans won't settle. But private lenders will. Get a private loan or pay off your federal loan with credit cards where possible. Then let it go.
- The Fair Debt Collection Practices Act ensures that you cannot be harrased for debt collection at your place of work, and third party collectors do not have the right to call you after you tell them (and be specific here) that “you can only contact me via mail”. After that they can call you one last time to verify your mailing address and that's it. If they call you after that? You can sue them (and yes, there are people who actually make a living off of suing debt collection agencies for these infractions).
- Yes this will ding your credit score significantly. But you can go from a 600 up to an 800 in 2 – 3 years. But seeing as many of us are doomed to never be able to buy a house anyhow: who cares? Save your money that you would pay on student debt or other debt and start paying for things in cash.
- If you're going to do this (and by all means you should)–be calculated about it. Keep a couple clean lines of credit cards open without debt while your credit score goes feet up–just for emergencies.
- Don't feel bad about this approach. This is a game that the banking class invented for their benefit with zero foresight to how this could eventually backfire on them. These are the rules they made up to take advantage of you. They attempt to rule using threats and fearmongering (you'll ruin your credit! You'll never buy a house!). But we've reached a critical mass where the majority of a generation has nothing to lose.
This is a risky approach–but it should be a calculated risk. If you find yourself saddled with an insurmountable debt — then by letting your debt slide, you will win. Your credit score will be back to normal long before you would have otherwise unburdened yourself from that debt.
Our system is a joke and it should be treated as such.
Good luck.