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The People's Bailout

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Re: The People's Bailout

#41

Post by namank »

patio11 wrote: post #25

For the benefit of folks who might not understand how debt collection works, which may include OWS: if you buy $10,000 of an individual's debt for $500 and then forgive the debt, they have just incurred income of $10,000 and are obligated to pay taxes on it exactly as if you had handed them $10,000 in cash for services rendered. If you don't inform the IRS that you forgave the debt, via a 1099-C, you're going to get…

If person A is in debt from Agency X, am I right in thinking that OWS would have to buy the debt from Agency X? They can't really buy debt from person A since A is in the hole...

Or OWS would buy from person A and, by some weird tax provision, doesn't have to pay agency A the entire amount?

Or...how does this actually work?

Yeah, I know nothing about money.

Re: The People's Bailout

#42

Post by malandrew »

HeyLaughingBoy wrote: post #11
cypherpunks01 wrote: post #6

This is a pretty interesting idea, economically speaking. Does anyone know what is necessary in order to become a debt broker? Being able to buy your own debt (by proxy) for pennies on the dollar might have pretty broad implications.

I think you just need to get a debt collector's license and that's not difficult. I'd ask my wife (used to be a collector), but she's asleep ATM. We did discuss starting a collection business years ago so I could learn the business and write software for it (apparently the tools they use are a royal pain), but she wasn't interested in getting back in the field and I lost interest. Bear in mind, though that to buy deb…

How large is "large"?

Re: The People's Bailout

#43

Post by justindocanto »

MattGrommes wrote: post #15
heyrhett wrote: post #10

The problem that I see with this is that once your debt is sent to collections, that mark is already on your credit report for 7 years, even if you pay off the debt. So, "forgiving" the debt is pretty meaningless. People still have their credit report tarnished, which leads to higher interest rates, higher car insurance, and is basically another way to oppress people who are already poor. The only advantage to the de…

This is "a" problem, not "the" problem. For a large number of people, getting $5k or $10k of debt erased would at the very least a large weight off their back, at the most a life changer. Living paycheck to paycheck means cherishing every extra dollar you get to keep. Getting to keep $50 or $100 a month in your pocket instead of sending off to some credit card or debt collection agency is a big deal sometimes. Most p…

But if theyre making payments on the debt, the debt collector won't sell it because theyre actually getting their money. The only debts OWS is going to be able to buy are the ones not making payments and the ones that havent made payments in a very long time. So, as cool as not having to pay 50/100 a month sounds, that wont happen to anybody because the ones paying are not the kind of people that would be getting relieved of their debt.

Also, the people who havent paid their debt in years hardly benefit from this too (this might even make it worse in a way) because not only have they had an unpaid debt sitting there, they now have a new mark on their credit saying somebody gave up on collecting on them and that they sold their debt to somebody else. This is even worse, from my understanding of credit, for your credit score then it is to just let the debt sit there. The person in debt obviously isnt making any payments if it's up for sale, so it's not like it saves them any money. All this does is modify their credit score.

This all sounded awesome skin deep, but as you look into it more... it doesnt really do much for anybody affected by Sandy or anybody in financial crisis in general. They're saving just a few people a few hundred bucks that wouldn't be coming out of their bank account for years to come... if at all, ever.

They would be more productive just giving money to people affected by sandy then paying off debt that people have ignored for years anyway. People need food, shelter, clothes, toiletries, warmth... not a 'hey we paid off a debt you havent cared about for years and you dont get to see any of the money we just spent on you, but sorry your cold and good luck'.

Re: The People's Bailout

#44

Post by heyrhett »

patio11 wrote: post #25

For the benefit of folks who might not understand how debt collection works, which may include OWS: if you buy $10,000 of an individual's debt for $500 and then forgive the debt, they have just incurred income of $10,000 and are obligated to pay taxes on it exactly as if you had handed them $10,000 in cash for services rendered. If you don't inform the IRS that you forgave the debt, via a 1099-C, you're going to get…

Good point, patio11. If debtors don't pay back their debt after after a certain time period, they are supposed to report it as income, but I doubt very many do. Setting up an organization like this puts the onus on the organization to file the 1099-C's

Re: The People's Bailout

#46

Post by malandrew »

bendmorris wrote: post #36
unomateo wrote: post #29

Earlier quoted context omitted.

I was thinking the same thing... To make this a better program they should buy someones debt, in the example they bought a $14,000 debt for $500. The person that had the debt removed should pay $1,000 back to OWS. Then OWS can buy 2 more... and so on. Unfortunately, the person that had the debt removed will probably just create more debt for themselves

Buying someone's debt and hoping to make more than you paid is what any collection agency does.

I'm interested in knowing if there is a business model in an "eBay or SecondMarket for personal debt" where anyone could buy and sell the debt of other people.

I get the feeling that there is disruption possible in this industry but I don't know enough about it to speculate how it could be disrupted.

Re: The People's Bailout

#47

Post by patio11 »

namank wrote: post #41
patio11 wrote: post #25

For the benefit of folks who might not understand how debt collection works, which may include OWS: if you buy $10,000 of an individual's debt for $500 and then forgive the debt, they have just incurred income of $10,000 and are obligated to pay taxes on it exactly as if you had handed them $10,000 in cash for services rendered. If you don't inform the IRS that you forgave the debt, via a 1099-C, you're going to get…

If person A is in debt from Agency X, am I right in thinking that OWS would have to buy the debt from Agency X? They can't really buy debt from person A since A is in the hole... Or OWS would buy from person A and, by some weird tax provision, doesn't have to pay agency A the entire amount? Or...how does this actually work? Yeah, I know nothing about money.

Person A bounces a credit card payment to MegaBank, MegaBank asserts their credit card is in default and demands full payment immediately, A does nothing, MegaBank attempts to collect fruitlessly for ~4 months, A does nothing, MegaBank sells debt (principal + interest) to Agency X, Agency X attempts to collect fruitlessly for 18 months, A does nothing, Agency X sells it to Agency Y, A does nothing, Agency Y attempts to collect fruitlessly for 12 months, A does nothing, Agency Y sells the debt to Agency Z, A does ntohing, Agency Z attempts to collect fruitlessly for 12 months, A does nothing, Agency Z sells the debt to OWS for 5 cents on the dollar.

Each time I say "fruitlessly" read "They autodialed them between 2 and 5 times per week plus sent biweekly dunning letters."

For your added edification, while MegaBank, Agency X, and Agency Y all have no interest in the debt after it is sold to Z, many of them have very terrible recordkeeping practices, so it is entirely possible that e.g. Agency X will attempt to collect on the debt even after selling it, and potentially even after it is cancelled by OWS. Person A may not notice that this has happened, because Person A is likely a) delinquent on more than a dozen similar debts and b) Person A very likely has a very different level of personal responsibility as compared to many people in your reference set.

Re: The People's Bailout

#48

Post by downandout »

patio11 wrote: post #25

For the benefit of folks who might not understand how debt collection works, which may include OWS: if you buy $10,000 of an individual's debt for $500 and then forgive the debt, they have just incurred income of $10,000 and are obligated to pay taxes on it exactly as if you had handed them $10,000 in cash for services rendered. If you don't inform the IRS that you forgave the debt, via a 1099-C, you're going to get…

I'm just thinking out loud here, but I would suspect that the IRS would only know that the debt was forgiven if the debt owner wrote the debt off as a loss on their taxes. If they simply hold it and do nothing, even if they deleted it from your credit record (which they can do), no taxable event would have occurred. I could be wrong in this crazy country of ours, but I believe there is no law requiring a debt owner to attempt to collect on it, or to write off a debt as noncollectable after a certain period of time.

Re: The People's Bailout

#49

Post by patio11 »

malandrew wrote: post #35
patio11 wrote: post #25

For the benefit of folks who might not understand how debt collection works, which may include OWS: if you buy $10,000 of an individual's debt for $500 and then forgive the debt, they have just incurred income of $10,000 and are obligated to pay taxes on it exactly as if you had handed them $10,000 in cash for services rendered. If you don't inform the IRS that you forgave the debt, via a 1099-C, you're going to get…

Couldn't OWS just hold it forever and not do anything with it? i.e. "Look I bought your debt, you don't have to pay me a penny for it ever, but I can't officially forgive you since to do so would subject you an income tax obligation. Just don't worry about it ever again and get on with your life."

Conspiracy to commit tax fraud.

Re: The People's Bailout

#50

Post by ImprovedSilence »

marknutter wrote: post #19

How does OWS think this debt accumulated? Debt isn't some random accident like getting hit by a car while crossing the street. You have to get yourself into debt. It used to be taboo, but it's acceptable to get into debt these days and worse yet, walk away from it. OWS, to me, represents an entitled generation.

Yeah, medical bills just happen sometimes, for the un-insured or under-insured. And you can easily rack up 10k in debt for a weekend stay at the local hospital for something you could have never helped (accident, disease, or otherwise). Crazy part is, you would never even know what hit you till you got the bill 3 weeks later. It's not like they tell you upfront, "ok, each IV you get is gonna be $550, each blood lab $230, and each vital check is gonna run u $55." I don't think they are bailing out loans on BMWs or mc-mansions...
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