The Responsible Choice Plan: A "Win-Win" for Lenders and Borrowers with Excessive Credit Card Debt

While detailing and exposing the problems are certainly important contributions, what Dr. Manning is working on now has the potential to dramatically change the way people with substantial debts can get back on their feet. His timing couldn't be better, given how universal default, the subprime mortgage mess, the credit crunch, the resetting of adjustable mortgage rates, and the recession are wreaking havoc with so many of our wallets.

Far too many hard-working families are in very serious financial trouble. Although most want to do the responsible thing and pay all their bills, many are $20,000 to $60,000 in credit card debt and can no longer make ends meet. If Dr. Manning has his way, far fewer of these folks will go into bankruptcy, and many more will be able to keep their homes.

Math Like You Wouldn't Believe

Manning has developed an algorithm, a very complex formula, known as the "Responsible Debt Relief Grading System (RDR)" that calculates how much of their outstanding debts people can realistically afford to pay back – depending on:

· What their total household income is.
· Whether they rent or own, live alone, have dependents, etc.
· Where they live and what their local tax liabilities are.
· What their employment status is.
· What they're left with after taxes, based on how many dependents they have and whether they itemize their taxes or not.
· What the US Bankruptcy Court mandates for household budgets/cost of living expenses in their specific locality.
· How the current bankruptcy rules and regulations would apply to them.
· What they owe – and more!

(If you're wondering how Manning could possibly figure all of this out, he's a professor at the Rochester Institute of Technology (RIT) and Director of its Center for Consumer Financial Services.)

Now, he's in the process of applying this grading system across the country to help both borrowers and creditors move forward realistically, by identifying who will benefit from consumer credit counseling services, who can only repay a small fraction of what they owe and unfortunately, will be best off filing for bankruptcy – and who is "near bankrupt" or only able to pay back between 20% and 60% of what they owe.

As Manning puts it, people can "get a free assessment and they don't have to worry about rip-offs." More technically, he explains:

"Based on the score and their cash flow/debt situation, consumers are referred to: (1)  our national CCCS partner InCharge (over 80% net repayment), (2) our Hope Financial "Responsible Choice" program (if consumers can repay 20% to 60% of their unsecured debt), and (3) our Debtor Attorney Network (if they cannot repay at least 20% of their unsecured debts). As a result, anyone with a debt problem will be able to find a debt management/resolution program that best suits their situation."

While CCCS programs typically take five years to complete, the Responsible Choice program is expected to last for three years, with Hope Financial managing the payments to creditors at a 40% to 80% discount. Manning adds:

"This is a win-win situation for all – people strapped financially can avoid bankruptcy; creditors will receive regular payments to offset their losses, and thousands of households will retain their homes."

In a Nutshell

Here's the way the Hope Financial site explains how the program works:

1. We objectively figure out what you can pay.
2. We fairly document why that is all you can pay.
3. We assist you through your payment plan over 36 months.

Sure sounds good to me! As of now, Hope Financial is taking on clients in Ohio and also in Texas, Florida, New York, Utah, and California, with other states soon to follow. Check it out and let us know what you think.

By the way, in the interest of full transparency, I am proud to say that I serve on the Advisory Board for RIT's Center for Consumer Financial Services. The center is truly one-of-a-kind and is really helping to facilitate positive change for consumers.

Curtis Arnold - Curtis is the CEO/Founder of CardRatings.com, a website that provides credit card ratings and reviews of over 20,000 offers.  He is also the author of How to Profit from Credit Cards: Using Credit to Improve Your Financial Life and Bottom Line (FT Press, 2008).

Comments

[Rob Schmidt]

For those in trouble they should take alook at these programs