What if you could free yourself from credit card debt or student loans completely, without filing for bankruptcy? That’s exactly what Jorge Newbery did, and he shares how in his new book, Debt Cleanse.
Like many Americans, Jorge struggled with debt. But unlike most Americans, he owed more than $26,000,000 after a natural disaster wiped out his multi-million dollar business. To say that the stress was “crushing” would be an understatement.
In this episode, Jorge shares the amazing way that he was able to settle his debts for pennies on the dollar, and how you can do the same.
Listen in to Jorge to learn:
- The simple way to gain leverage over your creditors
- Why most debt attorneys give bad advice
- How to beat the stress caused by crippling debt
Jorge, can you tell us how you ended up with $26 million of debt?
From 2000 to 2006 I owned a 1,100-unit apartment building in Columbus, Ohio; one of the largest apartment complexes in the country and the largest out of 4,000 apartments that I owned across the country. At the time I had a net worth in the tens of millions. I was doing really well.
Then, on Christmas Eve of 2004, The Meadows, my 1,100 unit complex in Columbus, got hit by an ice storm that caused extraordinary damage to the property.
At the time I thought I was all good from a business standpoint. I was well insured, but the insurance didn’t want to pay. We ended up in litigation that triggered a series of events which laster over a year. After the first 12 months, I finally started to realize that I might not get out of this thing unscathed.
I had taken out loans on all of my other properties and despite the fact that the insurance company ultimately settled for a huge amount of money, 32 million dollars, I owed my creditors 45 million dollars.
Finally, the City of Columbus decided that wanted this property for themselves, yet I was still optimistic that we could turn things around.
It wasn’t until around January of 2006 that I finally gave in and accepted that I wasn’t going to escape this failure. The publicity was just so bad and the city administrators had made up their minds long before I was ready to give up.
Years later I did a book signing in Columbus and a city inspector came up to me told me that when all of this was going on, the city had said that no matter what I did, they had to fail me. I didn’t realize that at the time. I kept thinking, “Hey, we’re not doing good enough. We need to do better,” but the reality was that the deck was stacked against us.
So I ended up losing everything and in 26 million dollars of debt.
I remember just after losing The Meadows and moving into another property lying in bed at night and grinding my teeth.
I had never done that before but I remember I’d wake up with my teeth locked shut going back and forth. My mind was trying to figure out how to get out of this thing. I was in deep. I was getting incessant calls and people showing up serving me lawsuits.
It was a tough time.
“I kept asking myself over and over, “What am I going to do? Am I going to file bankruptcy?” I didn’t want to go bankrupt, but I really had no idea how I was going to get out of this thing.”
How did you begin to climb out of debt?
There was a property that I owned in Kansas City that went into foreclosure. I showed up to the sale and the lender showed up. I actually had a delegate there on the cellphone with a bid but the lender made a mistake.
I called my attorney the next day and we challenged the lender in court. The case ended up going on for more than two and a half years. It went all the way to the Missouri Court of Appeals, which is the highest court in Missouri, and they ended up deciding in my favor.
Basically, their decision was that the creditor’s attorney had inadvertently extinguished 5.6 million dollars in debt. A huge amount of debt was now gone.
That was a bit of a tipping point. I thought, “Hey, these guys made a huge mistake. I wonder if my other creditors have also made mistakes?”
I started going through the documents, through the correspondence, through the lawsuits, through everything I could get my hands on. I was looking for any type of error, even small modest errors; anything I could find which I could use to gain leverage over the lenders.
“What I found was shocking. For almost all of my debts I found errors in the debt itself or in the lending practices. I kept looking and I kept finding deficiencies. I then started exploiting these deficiencies successfully.”
It’s not like I’d call the bank up and say, “Hey, I found a mistake so as a result, I don’t owe you any money.” It’s more like, “Okay, I found this mistake. I owe you $100,000 but I’m willing to give you $10,000 and avoid the costs associated with going to court for the rest.”
I found that if you become the exception, the problem, and if you refuse to go down their assembly line, you fall off the assembly line. They have to pay attention and they will find a way to get rid of this situation and you.
The Debt Cleanse is based on finding these errors and exploiting them for your benefit.
What would you tell listeners who may have a significant amount of debt and are looking to break free?
The first thing to do is to figure out if you can or cannot afford to pay your debt payments. If you can’t pay off your debt, just stop paying.
If you can pay it, then continue to pay it. But my book is really for those people who can’t afford to pay back their debts. It’s for those that may have lost their job, had an unexpected medical emergency, just gotten divorced, or experienced a death in the family.
There are a countless number of reasons why individuals and families in America end up with unaffordable debt. It’s a huge percentage of the population and they really struggle. What most people do when faced with an insurmountable amount of debt is take out additional loans, credit cards, and bill consolidation loans. They pay off one debt and replace it with another and then they end up maxing out their credit cards again.
It’s almost an endless cycle of debt, but eventually, it will end, and if they can’t afford it, it’s going to end badly.
The first thing I tell people is to stop borrowing money from your friends and family. Stop taking loans against your house in order to pay credit cards. If you can’t afford your debts, stop paying them. All of them.
“Your credit score is going to get messed up if you stop paying one debt, so at that point, just stop paying all of them.”
Again, only stop paying if you really can’t afford it. If you can afford it, pay it. But there’s a lot of people in America who cannot afford their debt today, and they need to take that step and just stop paying.
Debt Cleanse gives you step-by-step advice on every type of debt from credit cards, to student loans, to payday loans, to mortgages, to business loans. Every type of debt, there’s a process to gaining leverage against your lenders.
You’ll still end up paying your creditors something, but you’ll end up paying them a lump sum settlement that gets rid of the debt once and for all.
Does this approach work for all types of debt?
It does apply to every type of debt, the only caveat is some debts may be treated a little differently. For example, a private student loan versus a government student loan. I detail the strategy for both of them in the book, but or a government-backed student loan there’s a bit of a different process where instead of settling the loan in court, you bring it to an administrative law judge.
The tactics are the same though; you look for problems, for deficiencies, or for errors, and you exploit those to your advantage.
That law student who just graduated with a quarter million dollars of debt who is now having trouble finding a job because there’s a glut, well now they may have an opportunity to fight back and get their $250,000 student loan settled for $10,000 or $20,000.
What do you say to people who believe that if you’ve gotten yourself into debt, you should pay your way out of debt honestly?
I hear that opinion sometimes, and I kind of understand the perspective, but this way of thinking has to stop. I mean, debt is a big drag in our economy, it’s a big drag in our country.
The question we should be asking ourselves is, why is it so easy to accumulate debt in this country?
Why would someone agree to lend a student a quarter million dollars of credit when, by all indications, that student is not going to be able to pay that back?
Why are average Americans able to accumulate tens of thousands of dollars of credit card debt?
If some people say, “Hey, it’s unfair that I pay for everything and he or she doesn’t have to,” I understand that perspective, but if you’re hundreds of thousands of dollars in debt then you have to do what’s best for you. If the banks take a hit, I have no sympathies whatsoever for Wall Street.
“The fact remains that the financial products that banks offer are, in many cases, exploitive of consumers. They’re really creating impossible financial circumstances for many families. Banks prey on the hopes and dreams of Americans who are generally very optimistic.”
People like to think, “Hey, just around the corner, I’m going to get a better paying job or I’m going to go on SharkTank and my business is going to take off.” Banks prey on this optimism.
Debt has contributed to suicides, to addiction, and to drinking. All these negatives aspects of society, many of them have a connection to debt.
Why don’t other financial gurus offer similar advice?
You’re right, not a lot of people promote this approach. Most books designed to help you get out of debt are going to say, “Hey, create a budget and watch your pennies.” That approach may be good for some people, especially early on before they have a big problem, but once you’re in a jam worrying about which credit card has a lower interest rate, it’s a no consequence, you’ve got to stop paying.
When you’re heading for bankruptcy, when your car is about to be repoed, when your house is in foreclosure, or when your credit cards are maxed out, that’s when it’s too late to count your pennies.
There are millions and millions of Americans in that situation right now who are going to listen to Dave Ramsey, and I have nothing against him, but all he is going to say is that they need to file for bankruptcy.
“Bankruptcy is not a great solution. If you have a job, you’re most likely going to file for Chapter 13 which means that you simply get more time to pay off your debt. The creditors can’t take adverse actions against you in the in near-term as long as you continue to make your payments.”
But you’re not getting a discount, you’re not leveraging any of the bank’s or creditor’s errors.
I don’t see that as much of a solution. A lot of people that enter Chapter 13 end up being unable to complete them, then they get dismissed and they’re back where they started. So bankruptcy isn’t really the solution for any of those families who are in over their heads with debt.
Can you share any reader success stories from Debt Cleanse?
I recently received a Facebook message from somebody who had bought the book, a young lady who was getting married. She told me that she and her her fiance had put off their wedding because they had thought they had too much credit card debt to be able to pay it all back, let alone afford the cost of a wedding.
Well, they took the advice in the book and stopped paying. Now they have a wedding date scheduled for this fall and they’re actually moving forward with their lives.
So there’s an example of someone putting something good on hold because there was this huge debt obstacle in the way. That was really good to hear.
The next step for them will be to use the tools and resources outlined in Debt Cleanse to deal with their creditors after they’ve stopped paying.
Another gentleman in a similar situation had delayed asking his girlfriend to marry him because he had a massive student loan. Again, he stopped paying and now he’s engaged.
We’ve had families who had been able to use some of the tactics in the book to obtain a modification from their lender where they weren’t previously able to. It’s been incredibly gratifying to see how this book has already helped so many people.
Finally, we had one guy in Washington DC with a home loan. He actually called me, which I’m not encouraging everybody to do, but he called me and said, “Hey, I’m really in this jam, can you look at my loan documents? I’m having trouble.”
He sent over just a handful of documents and we found some significant errors right away. In many cases, these loans get handed off from lender to lender and that’s when mistakes get made.
In this particular case, the error had been made on the assignments. The lender named the wrong mortgage holder on one of the assignments and that’s a show stopper if they try to foreclose. So, this gentleman was going to point that out to his lender. In the in the meanwhile, he stopped paying which gave him hope that he was going to be able to get a deal, which he ultimately did.
What’s next for you and Debt Cleanse?
Well, we already have a website set up where readers can access tools and resources to help them overcome their debts.
At this point it’s free, but you can do all sorts of things from generating dispute letters and document request letters for all types of loans and all different situations, to uploading all your documents for each of your loans so they’re organized and easy accessed from one location.
It’s all at DebtCleanse.com.
Once your documents are uploaded, you can create a profile for each of your different loans and log communication with your creditors.
For example, let’s say a creditor calls you at 10:00 pm, well, they can’t do that, so you could log that violation in your debt profile. If you ever end up in litigation, that may give you some leverage. In fact, in the book and on the website, we have almost a thousand different deficiencies segregated by debt type.
So if you have a student loan or a car loan, there are multiple ways your lender could make a mistake, but this list isn’t even exhaustive; we’re adding to it constantly.
“It’s remarkable that for the vast majority of debts in this country, at some point in the process, lenders have made mistakes that can be levered into significant settlements.”
I’m also hoping that is in a couple of months we’ll be able to connect debtors in this country with qualified attorneys in every state that have been trained in the methods outlined in Debt Cleanse.
In fact, you’ll be able to meet with an attorney and simply give them access to your loan profile on DebtCleanse.com, so that they can immediately see all of your loan documents and any communication you’ve had with creditors. They can then look for deficiencies and use those to gain leverage against those creditors quickly.
What do you hope to achieve with your book?
I’ve been in massive debt before, and at the time I would schedule meetings with attorneys and go in and ask, “Hey, I owe all of this money, what can I do?” Most of the attorneys would ask, “Okay, well, did you get the money? Did you sign the paperwork?” I’d say, “Yeah,” then they’d say, “Well then you have to pay it back.”
How is that helpful? Where is the dispute there?
What I really want to do with my book is to get the message out there to families or individuals who find themselves with massive debt that they can’t pay back that there is an alternative option and that not every attorney is going to have the right answer.
You can stop paying your debt and you can get leverage over lenders in order to settle your debts at a discount, or in some cases, simply not pay them at all.
I lived through this exact experience and I emerged from it successfully, so I think other people can too. My mission is to help Americans who are crushed by unaffordable debts.
What’s Jorge Newbery’s number one stress management tip for anyone dealing with debt?
Luckily I am not a drinker, but I run. So, I would run which is a great stress reliever, but it doesn’t have to be running, it could be playing tennis, it could be working out, going to fitness classes, yoga, or whatever. As long as you’re doing something physical that allows your mind to break free of the day-to-day beating that you experience when you’re in debt.
Because it really is a beating. The thought of that debt is always on your mind, even when you sleep it’s there.
The first thing I did when I woke up in the morning was check my bank accounts because I still needed some money in there just to survive; money for things like utilities or food. I’d go and check to see if all my checks cleared? You’re really living paycheck-to-paycheck and that’s very difficult.
You feel like you’re drowning and you’re just trying to stay afloat to stay alive, so I think that any kind of physical exercise is really helpful to get through those really tough periods.