This is Jeff Rose of Good Financial Cents and soldieroffinance.com. I have another great interview here. As most of you know I'm a financial planner by day and I help people manage their money, which is mostly investments, but when it comes to debt and how to take care of past debt or helping with debt consolidation, that's where even myself as a Certified Financial Planner, I don't have a lot of knowledge in that area. That's why I wanted to bring Damon Day of Damon Day and Associates on here who has helped hundreds of people with getting rid of their debt and also avoiding debt settlement scams.
JEFF: Damon, I just want to welcome you to our little video here.
DAMON: Thanks for having me on, Jeff.
JEFF: So we're just going to get into it and just share with people what really got you to where you're at now with founding Damon Day and Associates?
DAMON: Well, it probably started back, I would say at least a decade ago. I was in college. I was struggling with debt myself. I couldn't pay some cards. I ended up getting sued on a couple of credit cards. I basically taught myself how to be an attorney. I represented myself. Just real quick, I ended up winning on those accounts by the way. One of them I actually lost. It was a $20,000 lawsuit from Wells Fargo. Then I had to teach myself how to do an appeal, and I took it to the appellate court and I won that.
Just going through that experience I learned that a) I was quite good at doing that stuff and b) there's a lot of people that are going through the same struggles that I was going through and since I was learning all this stuff it might be a good thing for me to share it with people and maybe turn it into a business. The way it came about was I realized that most people likely would not want to take it to the level that I took it.
Most people are not going to want to go represent themselves and be in court and it just evolved into what are the things we can do if a consumer is struggling and has debt. What things should you not do to avoid getting into the situation that I was in where you're getting sued and having to represent yourself and things like that. It just evolved from there. I started helping people with it. I went to work for a good friend of mine who ran a debt settlement company and working there I was basically referring clients to the program.
I got to a point where I was really struggling because when you're selling something you're selling a widget right? I was doing a free consultation and they would call in and I would go over their situation, but they wouldn't really maybe fit what I was selling. It just really got to the point where I had this constant struggle between having to make a sale to make money, but at the same time if the consumer doesn't need what I sell I need to get them off the phone and go talk to somebody else, if we're going to be honest, from a business stand point right?
Eventually, a few years ago I just got to the point where I felt that I was taking the time with these consumers and really if they didn't need what I sold I still took the time to tell them what they needed and what they needed to do, but I wasn't getting paid for it. And I really went broke.
I went broke by trying to help these people when I could and I realized that it made sense for me to go off on my own and start this business where what I was essentially doing was offering the consultations as a service because that's really where I felt the value was coming from.
JEFF: Gotch ya. So your own personal experiences that you went through, your own journey, that really has been the motivation to help people. That's what it sounds like.
DAMON: Yeah, as far as helping people. To me it's human nature. I think most of us are hard wired to if you can want to help somebody. If you have this knowledge that you know there is a lot of struggling people that could benefit from that knowledge, if you could create a business and earn a living by helping other people at the same time then that's just a win win right? Why would you not want to do that?
Debt Consolidation Process
JEFF: Right, exactly. As far as your consultation, walk us through what that really means or what you actually do to help people.
DAMON: Well, before I went out on my own and I started charging for my consultation I really thought about it for a long time because it almost was like financial suicide. Most consumers are programmed to get a free consultation, right? You even give free consultations, but your business is obviously a lot different. If you talk to a bankruptcy attorney you get a free consultation. If you talk to a debt settlement sales person…… Everything is kind of free. So then here I am saying I don't do free consultations. You need to pay me a fee for the consultation. The natural reaction is to say why would I pay you when all of these other people will talk to me for free? That's been the hardest struggle; teaching consumers that there is a lot about the debt relief industry they don't know.
They don't know what they don't know. For the most part there is a lot of bad stuff that goes on in the debt relief industry. It's a lot of stuff that is really geared toward separating consumers from their money rather than helping them get out of debt. When I'm doing the consultations my main focus is….. well let me just break it down this way, I guess. Let me back track a little bit. A consumer can call for instance a debt settlement sales person and they're probably going to get sold a debt settlement program. The difference between what I do and what a debt settlement sales person does is I don't go into it with any preconceived notions. I'm getting paid directly by my client for the hour that I'm going to spend with them on the phone. What my job is is to learn about the consumer's situation and figure out exactly what the best financial strategy is going to be whether that is bankruptcy or debt settlement or credit counseling or something else all together. My focus is not to sell them something because I don't get paid to sell them something. I get paid to tell them what they need to do.
Once we figure out a step by step plan of exactly what they need to do, if they do need to hire a company I can refer them to a good company I know and trust and then get them a discount from that company that's even much larger than what my consultation fee was in the first place. Basically, in a nutshell what I do is I work with the consumer to figure out exactly what they need to do, show them how to implement that and then work with them to make sure they don't get taken advantage of or ripped off by some program that is trying to sell them some widget or whatever. Some one-size-fits-all solution. Basically, having somebody on their side is really what it is.
Debt Settlement Companies: What to Watch For
JEFF: I don't know much about a lot of these other debt settlement companies. You mentioned as far as them having that free consultation and charging for that widget. What kind of prices do you expect consumers to pay for these programs that they may not need?
DAMON: I want to clarify one thing to you. I don't think that a lot of the debt settlement sales people are evil or not really wanting to help people. I don't believe that at all. I believe most people are very good. As far as debt settlement goes I believe a lot of them just don't understand fully what they are selling because they are sales people. They don't have a financial background. I just wanted to clarify that. I'm not saying that all the debt settlement sales people are evil. Most of them would refer their families and things like that. I'm not necessarily saying it's the worst thing ever, but it might just not be the best thing for a consumer.
As far as fees and stuff with debt consolidation you're typically looking at, depending on how much your debt is you could be looking at 2, 3, 4, 5, 10, 15,000 dollars in fees. We're talking about a lot of money so investing $147 to make sure you really need to spend $10,000 before you actually do it is kind of a no brainer. When I started the business I went out and I looked for other people to see who else is doing this business because whenever you start a business you want to see who is doing it well, who is not doing it well, what can I learn so I don't make the same mistakes. I couldn't find anybody. I'm not saying there is nobody else out there that does what I do, but I couldn't find one.
That made me really nervous and that's why I said it might have been financial suicide because if somebody else is not doing it and there is a huge need for it, there might be a reason they're not doing it. The reason is it's a lot harder to make money by saying hey look instead of charging you $10,000, I'm going to charge you 150 bucks and tell you whether or not you even need that service. I can make a lot more money if I would just refer them to the company for $10,000. I would probably get a 2,000-dollar kick back on that. It's really hard from a business standpoint to forego that and say nope, I'm going to help you for 150 bucks and instead of getting a referral fee I'm going to pass that referral fee on to the client as a discount.
JEFF: You're doing such a tremendous service for these people and I think that's awesome so kudos to you for doing that.
DAMON: It definitely relies on people like you so I appreciate you taking the time to put me out there on goodfinancialcents.com and getting me the exposure because I don’t advertise. I obviously can't afford to compete with the company charging $10,000 to advertise so I appreciate you getting the message out.
Who Needs Help With Debt Settlement?
JEFF: What would you say is the typical profile for someone that does need a debt settlement service or program?
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DAMON: A typical profile for someone that is debt settlement… when you look at debt settlement, the way I work with clients is I really start with what I would call is the most mainstream approach or the least damaging approach. What I do with my clients is I work our way through that and I say okay, you've got this debt. We look at all the different things that are going on: How old they are, what kind of retirement do they have, do they own their home, are they upside down in their home, do they have kids going to college. We look at all the things that you would typically look at as a financial planner.
The time that you would take to first- you know this- you have to learn about what's going on with the client before you can advise them on what to do. So when you call a debt settlement company 1) you're talking to a sales person and they are not trained to do that and 2) they are not paid to do that. They are just basically saying you have debt, we have this solution. Let's see if we can fit your problem into our solution. Okay. I take the opposite approach. I figure out what's going on in their life, their financial life, what their goals are and what they are trying to do and then we look at all the options, not just is this right for debt settlement. Let's look at can you call your creditors and work with them and get the interest rates lowered a little bit, lower your payment. Overall, is that going to be a good solution, is that going to work.
Okay, no that's not going to work because looking at your cash flow I can see whatever it is I can see you can't afford that. Okay, what about a credit counseling program. I can explain what that is. After that, if that is not going to work then we get into a debt settlement strategy. Debt settlement, to answer your question is really in between bankruptcy and credit counseling. Where credit counseling is a more mainstream approach, you don’t fall behind on your debts, you're working with your creditors up front, there's a new contract in place essentially and you're paying the bill every month. Bankruptcy, like a chapter 7 is just okay, uncle. I can't do it. There's just no way. I lost my job. I'm unemployed. I'm just going to have to file bankruptcy. Debt settlement is that middle ground. When you get into debt settlement as far as who fits the profile it is somebody that doesn't have the cash flow to really make a credit counseling program work and somebody that is in a situation that they either can't qualify or they don't want to file bankruptcy.
When you say bankruptcy that is usually a chapter 7 because a chapter 13 obviously is a whole different story. Somebody that has debt, has some assets available that they can maybe liquidate in order to settle the debt or has some sufficient cash flow coming in that is not enough to really pay the debt, but it's enough that within a reasonable amount of time, a year maybe two years, they can save up enough to go in and offer some settlement. In the middle between counseling and bankruptcy is somebody that might want to look at a debt settlement type of strategy.
JEFF: Okay. We were chatting the other day and we had talked about some of the not so good debt settlement companies, and I think you shared a story or two of some folks that had been taken advantage of. I believe these were people that didn't actually go through your initial consultation which would've probably saved them. Can you just share some of those horror stories that can maybe give people more reasoning to try to find someone like yourself to consult and make sure they don't go down that wrong path?
DAMON: Unfortunately, most of my clients come to me after the fact, right. And they don't consciously do it. It's just when you're in debt every dollar matters. You want to be able to get something for free because you don't want to spend any money, but in the end it always is going to cost you more money. I can share a couple of quick stories. This was about two years ago, I had a client call. She was actually enrolled in two settlement companies at the time. I'm not going to get into a lot of detail on it. I wrote about it on my blog. If somebody wants to check it out they can go read the story.
Essentially there were two companies fighting over her. Her situation was she had about $100,000 in debt and she was on essentially a fixed income. She was living on an amount of money that she had set away that she had gotten in a settlement. She wasn't working. She was an older lady and she had a fixed amount of money. At her current cash burn rate she would have been literally broke in 12 months. Literally, completely out-of-money broke. Only thing left, $700 a month for Social Security.
So she was in a situation where a settlement made no sense at all because she has $100,000 in debt. She is going to be out of money and bankrupt in 12 months so it was at a point where she didn't even need to worry about the debt. She had to worry about paying her mortgage, food on the table, those kinds of things.
So here you have two settlement companies that what they saw was dollar signs because they were going to make $15,000 on her debt. They were both fighting over her. She signed up with one, got cold feet. The other sales guy got a hold of her. He convinced her that because they had less complaints with the BBB they were a better solution, so she signed up with them. All these guys were doing was they had her on a plan to pay them $1000 a month for 15 months or something. They were collecting all their fees up front.
Basically all that was going to happen was she would go through this, pay these guys all their fees and then run out money. Then they would say well it's your fault. You ran out of money. We can't settle the debt because you ran out of money. All they were doing was giving her a fast track to bankruptcy for $15,000. For 150 bucks I can get you to bankruptcy just as fast.
So anyway, I got her out of both of those programs. We cut her spending in half. I convinced her to sell her house, which she needed to do. She got about $60,000 in equity there. Moved into a nice town home which had a lot less rent, and she really consolidated a lot of her expenses. The best solution we could have at that point was just to try to conserve as much cash as we could until she could try and get a job. She couldn't file bankruptcy either because they would just take the 100 grand. It wasn't protected. It wasn't in retirement accounts. So she couldn't file bankruptcy and debt settlement was going to be nothing but wasting whatever money she was going to put into it. She was in this zone where none of the mainstream solutions would work, but nobody got paid to tell her that.
Anyway, she loves me. We still converse every once in a while. She ended up getting a job after about a year of getting her house sold. Things are going a lot better for her now. In fact one of those companies sent me a cease and desist letter because of the story I wrote on my blog. I said you guys are just ripping this lady off. What's going on here? It was one of the larger debt settlement companies out there. Large doesn't mean good. Large means a lot of sales right? A lot of sales usually means not good. They sent me a cease and desist letter, basically threatened to sue me if I didn't take the story down. Not only did I not take the story down, I put the cease and desist letter and made a new story out of it on the blog. Since then I have not heard from them. That was about a year ago.
JEFF: I'm going to have a link to that story on the blog and the interview as well so the viewers can check that out.
DAMON: I know we are on a time crunch. I have a couple more stories but the bottom line is when you're getting a free consultation even if the guys nice and he's good and he's really believing what he's doing, when it comes to the debt relief industry you don't want to skip over the step of first finding out what strategy makes the most sense. Then you can start talking to the sales guys and figuring out which company you like if you need to hire somebody. But don't get into that until you know if you even need that solution because they are not there to tell you that information.
JEFF: Real quickly, I want to say if people need to find you where do they need to go?
DAMON: To find me it's real simple. You just go to DamonDay.com.
JEFF: Okay. That's your hub. That's where they can find out information and fill out the consultation. I will have a screenshot here so you'll be able to see that. I'm trying to keep this under 20 minutes so I can get it on Youtube and people can see you. I want to close with the most important thing. As you know I am a huge, huge In-and-Out Burger fan and I believe that you are on the same page as me. Could you just please share with the audience your thoughts on In-and-Out Burger.
DAMON: I know you have this big rivalry going on with this Five Guys Burger. I have never had Five Guys Burger. They are not out here. I'm out in California.
JEFF: You don't need to. I'll just tell ya. I've had it. You don't need to.
DAMON: Well, I'm out in Southern California. I can literally walk to In-and-Out Burger, which makes Jeff very jealous, but yeah, a double double at In-and-Out, animal style. You can't find a better burger anywhere. You can drive up and have it made right there and handed it to you. You can eat it in the car. They even ask you if you want to eat in the car and they give you a special tray. Who else gives you a special tray? Nobody. You can't get a special tray.
JEFF: Nobody. Nobody. That's the point exactly. Damon I just want to thank you for your time. Thank you for this valuable information. If you want more information I will definitely have plenty of links to get a hold of Damon and ask him any questions about your debt situation. We appreciate it and we see you guys next time. Thanks again Damon.
DAMON: Thanks Jeff.
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