Jason Hartman interviews the founder and CEO of Debt Cleanse, founder of American Homeowner Preservation, and author of Debt Cleanse: How to Settle Your Unaffordable Debts for Pennies on the Dollar, Jorge Newbery. He shares how he got started paying off his $26 million debt and what’s the best thing to do if you can’t afford your debts. He also talks about using the same rights that your creditor has to protect yourself from predatory lending practices.
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Announcer 0:11
Welcome to the holistic survival show with Jason Hartman. The economic storm brewing around the world is set to spill into all aspects of our lives. Are you prepared? Where are you going to turn for the critical life skills necessary to survive and prosper? The holistic survival show is your family’s insurance for a better life. Jason will teach you to think independently to understand threats and how to create the ultimate action plan. sudden change or worst case scenario. You’ll be ready. Welcome to ballistic survival, your key resource for protecting the people, places and profits you care about in uncertain times. Ladies and gentlemen, your host, Jason Hartman.
Jason Hartman 0:59
It’s my pleasure to welcome a returning guest back to the show and that is George Newbery, he is founder and CEO of debt cleanse, founder of American homeowner preservation, otherwise known as HB, a socially responsible Hedge Fund, which purchases non performing mortgages from banks at discounts, then shares the discounts with families to settle their mortgages. At terms many borrowers find too good to be true. He’s a renowned debt and real estate investor, endurance athlete and best selling author of burn zones. He was on the show talking about that before. But today, we’re going to focus on debt cleanse, how to settle your unaffordable debts for pennies on the dollar, and not pay some at all. George Welcome back. How are you?
Jorge Newbery 1:44
Great. Thanks for having me back. Jason.
Jason Hartman 1:46
You know, debt is kind of a confusing topic. Oddly, it doesn’t seem like it should be confusing. It seems like it should just be simple, right? If you’re going to borrow money, you got to pay it back. But there’s really a lot more nuance to it than that, isn’t there?
Jorge Newbery 2:02
I’d have to agree. Yeah.
Jason Hartman 2:03
Yeah, There sure is. Because it’s a complicated world in which we live. And you know, you’ve probably read this book, I finished it a while back. And it’s called debt, the first 5000 years, it was absolutely fascinating. I’ve not interviewed the author. But it really points out as Do you how some of these deaths are really quite unfair and unscrupulous. And when the Great Recession broke out, and everybody was complaining about predatory lending. My first reaction to that was I kind of scoffed and I said, Oh, that’s ridiculous. Just pay your bills. You know, but really, when you understand what’s going on, at a higher level, it’s just not that simple, isn’t it?
Jorge Newbery 2:47
Absolutely. It’s a in many cases, families and small business owners are peddled predatory financial products, which in many cases, set the borrowers up to fail. So debt on itself, or credit products, in and of themselves can be good things. But when they’re marketed, and designed and created in a predatory manner, that’s not a good thing.
Jason Hartman 3:09
It’s kind of like the food supply almost where, you know, you might say, well, if you don’t want to be overweight, then be more responsible, eat more carefully, right, which is true on its face. There’s no question about that. Look, I’m, I’m into health, I eat, I think very responsibly, and I’m not overweight, you know, but it’s more complicated than that there really are forces outside of oneself, you know, access to the right capital, access to education and access to the right food. I mean, in some poor areas, they have a term I only recently became familiar with called food deserts, where literally, you can’t access decent food. It is very difficult. The same is true of financial products in a lot of these cases, isn’t it?
Jorge Newbery 3:57
Absolutely. In some of those same neighborhoods that our food deserts are plagued with pay here? painting our lawns? Yeah, yeah. payday loans.
Jason Hartman 4:05
Auto Loans. Yeah,
Jorge Newbery 4:06
absolutely. And those check cashing services, those are concentrated in loader monitoring can neighborhoods which are the most vulnerable populations, and those ones that are most exploited?
Jason Hartman 4:17
Yeah, very interesting. Well, tell us about the debt cleanse thesis, if you will, you know, let’s hear about some of the problems and solutions.
Jorge Newbery 4:26
Sure. So the thesis is that if you cannot afford your debts, the best thing you can do is to stop paying them and stop paying all of them. And in doing so, and settling that setting that money aside, you can do a couple things. One, you can settle those debts as it becomes favorable to do so and I’m talking about settling them in lump sum, discounted lump sum settlements, or achieving some kind of modification or workout on maybe a mortgage or some of the larger debt sizes. But the key is to stop paying, you will not get a great deal of no resolution until you stop paying And that’s unfortunate, but it’s true.
Jason Hartman 5:02
Well, it’s really interesting. And by the way, I just want to you shared this when you were on my show before, but we didn’t share it in this interview, the listener should know that you are not some kind of consumer yourself that got into, you know, a bad auto loan or a payday loan, you used to own 4000 units, you were a big real estate investor. And you had an 1100 unit apartment complex and 2900 other units as well. So you have dealt with debt on a major scale, haven’t you?
Jorge Newbery 5:36
Absolutely. And was always my friend up until an ice storm devastated that 1100 unit complex. And another tidbit that you learn is, hey, there’s a big insurance claim the insurance carriers, often their strategy is to not pay it, deny it, force you to litigate, and drag it out as long as possible until you’re financially exhausted. And you come to some kind of settlement kind of sounds like, you know, we propose to do to creditors. But that’s what happened there. The insurance company denied the claim we had to litigate. And meanwhile, I had this property that was absolutely devastated by the ice storm. And it triggered this extraordinary sequence of events in which I lost everything and ended up $26 million in debt. $26
Jason Hartman 6:15
million in debt. Wow, that’s just mind boggling. mind boggling. Okay. So back to the thesis of debt cleanse, how do you know what debt to pay and what not to pay? There’s a question for you.
Jorge Newbery 6:27
I don’t think it’s a question of choosing between which to pay, it’s a question of what your current financial situation enables you to pay. And certainly, if you can afford to pay all your debts, you should pay him. But if you can’t pay them all, and you realize that if you total what you’re bringing in each month, and total what’s going out each month, make a realistic assessment. And today, don’t say hey, well, maybe next week, I’m going to win the lottery aren’t going to get discovered on Shark Tank or something like that, say, no promotions, no, nothing. This is what I’m dealing with today. Is it realistic, that I’m going to be able to continue to make those payments, and if it is, you should pay but if it isn’t, it’s better to proactively stop paying those debts, then to continue to pay some This is what I started out doing. I paid some and then the next month, I paid some trying to keep everyone at bay. And in the end, I was just absolutely financially exhausted. And at my most my weakest moment, and then I just I mean, financially, I collapsed.
Jason Hartman 7:23
So $26 million in debt, you ultimately stopped paying Now, did you follow the plan you’re outlining? I mean, because you had to learn as you go, you didn’t have debt cleanse, right? You didn’t have a system? I mean, I’m guessing you kind of develop the system as you go or tell us what you did. And what happened and what people should do.
Jorge Newbery 7:44
Absolutely. This was system was developed with my back against the wall. And I was, you know, what do I do? Now the good news, and what I share in the book is that creditors often make mistakes. And when you can find those mistakes, you can exploit them. And I’ll give you the one that really kind of turned the corner for me, one of my creditors made a mistake. And it was a fairly modest one, but I took them to court. And I won, they appealed it, it went to the Missouri Court of Appeals, which ruled that the creditor had inadvertently extinguished the $5.6 million debt. And so I didn’t have to pay. Now, that was a huge win. And right away, I thought, Wait, well, this creditor made this error on this huge mortgage. What about my other creditors, and I went out, pulled out all the paperwork, the collection calls, the legal pleadings, everything I had every record that I had, I reviewed it to find the errors. And whenever I could find an error, I was able to use that as leverage in settling down at a big discount. There’s one case, the error was so egregious that we went to court and not only did I win in terms of I didn’t have to pay the debt, but I actually got a judgment against the creditor.
Jason Hartman 8:52
Wow, tell us about that one, how much and why did you get a judgment against them? Was it because the court award you that because they were doing really bad predatory things? or Why?
Jorge Newbery 9:02
Really, the lender I think just gave up because they thought this is too exhausting to battle the sky and they wouldn’t be my legal fees. So it wasn’t like a huge victory, but they paid my legal.
Jason Hartman 9:10
Okay, good.
Jorge Newbery 9:11
I mean, let’s dive into the system like what do people do? Okay, stop paying. We heard that well, then what then collect all the documents that you have from when you took out the loan from any billing notices any collection notices any legal pleadings, anything like that, you want to gather them together, and we’ve created this website lately, so just recently launched last week, where people can upload all those documents to the website, when they get a call from a creditor, they can log the call, the goal is to aggregate all this data and documents so that when you do get into trouble, or when you get into litigation, you and an attorney can review and try to find those errors like I found, okay, and having it all in one place makes it a lot easier than having Hey, where’s that document you know, attachment to an email or in a box or wherever it is? Okay. So
Jason Hartman 9:57
what kinds of things Are you looking for I mean, okay, so gather your documents be organized. I mean, what are you looking for in those documents? What kind of mistakes might a lender make? Or you know, wrongdoings? Might you catch them on?
Jorge Newbery 10:12
Sure all kinds of stuff. To be clear, these errors aren’t by necessarily just small lenders and collection agencies, these are sometimes these errors can be made by the biggest banks in the country. For example, if you’re in foreclosure, many a times who’s ever foreclosing may not have all the assignments or the launches, which transfer the note, they may not have all those, and they may not have had those when they started the foreclosure. As a result, they may lack standing. And this happens all the time. But most of the times the debtors don’t contest the foreclosures, and it just the paperwork, it just goes through even though it’s missing. But if you challenge it, because you found these errors, everything stops many times. It’s like, think about this, you know, these collection agencies, their attorneys, and those for the mortgage companies, all these loans kind of go down a conveyor belt. Now, once you’re the one that answers and finds errors, your debt falls off the conveyor belt, and now you know, the creditor or their attorney now somebody has to kind of figure out well, how do we get this moving forward? And many times, it’s easier for them to say, what do you guys want, and we owe you $100,000, where we want to settle it for 10,000, if it’s if it’s unsecured, or something like that, those things happen all the time. So,
Jason Hartman 11:22
I mean, we’ve all heard of these, well, maybe not everybody, but these incredible workouts. And interestingly, it could be profitable for the lender to you know, or the buyer of that, that note, like there would be these non performing notes, they’ll go to the lender and buy them as your hedge fund does. And then, you know, settle them for pennies on the dollar. And, oddly, you know, everybody can kind of win out of that situation, you wouldn’t think so you would think someone’s taking a huge hit. But model was right. Yeah, the hits, lots of times already been taken by the initial lender or some lender down the line, not the debt buyer that you’re settling with. And the reality is the hit was really taken by the TARP program, the taxpayers, or a private mortgage insurance company, or some you know, it’s such a web, it’s so complicated. It’s just not simple, is it?
Jorge Newbery 12:12
No, absolutely. There’s all kinds of people, entities that can absorb these hits. And and it’s the it’s a cost of doing business. And I think the reality is, you know, one could step back and say, Well, why aren’t the banks or the collection agencies? Why aren’t they more diligent with their compliance and keeping their documents together? And the reality is, I think they just considered a cost of doing business. And the vast majority people do not fight back. And as a result, it’s cost effective to leave it as is. Hopefully, you know, we can help change that. And ultimately, maybe the practice of marketing of collecting debt can be improved, because it’s really, if you get in trouble of anyone who’s ever been in trouble with their debts, they’ll see, you know, all kinds of stuff happens. And many times, you know, it’s questionable, the the practices that are falling.
Jason Hartman 12:56
Yeah, no, it definitely is. And then, you know, you get to the part about debt collectors. And boy, what a sleazy industry. That is, I mean, they have laws, and they just regularly disregard them, don’t
Jorge Newbery 13:08
they? Absolutely. It’s amazing. I mean, we had one of our first clients. A debt cleanse was a business here in Chicago that was had fallen prey to these merchant cash advances, which, if you’re not familiar with them, it’s kind of like a payday loan to a business. And they’re horrific. The annual return on this was 80%. So this business, but it was disguised and you look through the documents that look like they were paying 5%, really they were paying 80%. And we went to court, it was clearly it was fraud. And we went the attorney that we connected the business within York, they ended up getting a temporary restraining order against the creditor. But it’s something where they did everything. They added different companies names to the litigation, the business had not signed some documents, and they were attesting the fact that everything was signed, it’s either just very sloppy, which is probably their fallback position if they as this gets uncovered, or it just clearly looks like fraud, and they think that they can do anything they want. Because most of these businesses are not fighting back. Yeah, well,
Jason Hartman 14:11
it’s really something else. Share with our listeners some other tips or, you know, just anything they should know about this topic. I mean, it’s a it’s a big topic, obviously. But you know, before you do that, I just want to say one more thing. There is a really interesting case and I profiled it on my show. Many years ago, when I was talking about the topic of fractional reserve banking, otherwise known as fractional reserve lending. It’s kind of all the same thing. I believe it was in the 60s where somebody was in foreclosure. And they actually took it to court as the lender tried to foreclose on the property. And they said, one of the points of the case was, look, prove to me that you really lent me this money, and that was meant in a much more esoteric way. Because in order to lend the money, you have to actually have it first. And it’s just an interesting thing about we could get deep in the weeds on, on the way the Federal Reserve works and the monetary system works. But they couldn’t prove it. Because the money was literally created out of thin air. And when you talk about thinking that the lender is going to actually lose money on the deal, the way our system works is so insanely weird. And again, you know, I’ve gone into this subject deep in the weeds on many prior episodes, and interviewed many, many experts about it. But it really is just a fascinating, fascinating topic about how the whole system is built on debt. And the debt, you could really call it fake debt. You know, everybody talks about fake news. Well, the debt is fake.
Jorge Newbery 15:54
It’s crazy. It is it really is. And it’s funny, and it’s not new. This has been going on for generations. I, you know, you
Jason Hartman 16:02
mentioned the the Federal Reserve, you know, came about over 100 years ago, and there were other central banks before that, you know, absolutely. We go back, you mentioned, family, and the way the system works
Jorge Newbery 16:12
around the world, you know, the elite often find a way to ensnare or even enslave the majority of the population and the way they do that was with debt. And actually remember the book, The 5000 year, the book that you mentioned at the outset, one of the things they actually use that a little bit as research when I was writing my book, they had mentioned that in ancient Rome, I believe, there was something called next one where you could pledge yourself as collateral for a debt. And you know, if you needed more collateral, you could pledge a son. And they were, it was just extraordinary. And one of the things that was discovered by the elite in Rome was that if you give people debt in the hope that they can eventually pay it off and and reach a better place a better life, then they’re going to work harder than someone who’s a slave who realizes that things are not going to get better and not going to improve. And I thought that was telling it’s unfortunate. If you look at it, you’ll see that many countries this is maybe even all the system is really stacked against the majority of the population, we’ll call it the 99%. Even though I probably say it’s more like the 90% or 88%, or something like that. But the statistics are horrific. You know, when I wrote the book, I included a statistic that 76% of Americans live paycheck to paycheck, that statistic has gotten worse, not better at currently, it’s 78% of Americans live paycheck to paycheck. So you see these widening wealth gaps, widening income gaps, and a lot of that is due to debt.
Jason Hartman 17:40
Let’s wrap up with sharing some actionable tips for people
Jorge Newbery 17:42
Sure, never feel that that you don’t have the same rights as a creditor. In all cases, debtors have the same rights as a creditor, just because you borrowed the money doesn’t mean that you have no defense. I think that’s a lot of people think, well, how can I fight it? I did get the money. I mean, I got my 26 million it was in in different loans and mortgages on properties. But I did borrow the money. I never contested that. So look for those, and then they’ll be little issues like a missing notary seal inconsistent dates, any of these things even I’ll give you a real quick. In Georgia, there was recently a situation where Georgia changed their laws slightly. And I believe they require an additional witness on on a mortgage and one of the law firms that does a lot of preparation of loan documents didn’t update their system. So hundreds, if not thousands of loans were generated, that were had this small error where they were missing a witness. And I know the the lender recently filed title claims on over 500 of these loans. Because when people were running into trouble, some of them were going to court getting these loans cancelled and turned into unsecured debt. So these sound like extraordinary, but these things there can be some extraordinary results for those that are struggling with their debts.
Jason Hartman 18:54
Yeah, yeah, good stuff. Okay. give out your website George
Jorge Newbery 18:57
its debt cleanse.com. Again, DBT cleanse CL EA n s e.com.
Jason Hartman 19:03
George Newberry thanks for joining us.
Jorge Newbery 19:05
I appreciate it. Jason.
Jason Hartman 19:08
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