479: Debt Cleanse, How the Elite Control the Average Citizen with Jorge Newbery

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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 Holistic Survival, your key resource for protecting the people, places and profits you care about in uncertain times. Ladies and gentlemen, your host, Jason Hartman.

It's my pleasure to welcome a returning guest back to the show and that is George Newb. He is founder and CEO of Debt Cleanse, founder of American Homeowner Preservation, otherwise known as ahp, 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?

Great. Thanks for having me back, Jason.

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?

I'd have to agree.

Yeah, yeah, there sure is. Because it's a complicated world in. And you know, you've probably read this book. I finished it a while back and it's called debt the first 5,000 years. It was absolutely fascinating. I've not interviewed the author, but it really points out, as do you, how some of these debts 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, is it?

Absolutely. It's 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.

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, 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?

Absolutely. And some of those same neighborhoods that are food deserts are plagued with pay.

Here, payday car lots.

Yeah.

Payday loans, auto title loans.

Absolutely. And those check cashing services, those are concentrated in low to modern income neighborhoods which are the most vulnerable populations and those ones that are most exploited.

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.

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 a resolution until you stop paying. And that's unfortunate, but it's true.

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 listeners 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 4,000 units. You were a big real estate investor and you had an 1100 unit apartment complex and 2,900 other units as well. So you have dealt with debt on a major scale, haven't you?

Absolutely. And was always my friend up until an ice storm devastated that 1100 unit complex. And another tidbit that you learn is, hey, if 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 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 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 debt not to pay? There's a question for you.

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 them. 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 or I'm 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 than 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.

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 developed the system as you go or tell us what you did and what happened and what people should do.

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 mist. 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 and settle in a debt 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.

Wow. Tell us about that one. How much and why did you get a judgment against them? Was it because. Did the court award you that because they were doing really bad, predatory things or what?

Really? The lender, I think, just gave up because they thought, this is too exhausting to battle this guy, and they awarded me my legal fees. So it wasn't like a huge victory, but they paid my legal.

Okay, good. I mean, let's dive into the system. Like, what do people do? Okay, stop paying. We heard that. 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 could 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 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?

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 a 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 a times it's easier for them just to say, what do you guys want? And we owe you $100,000. Where you know, 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 I mean we've all heard of these. Well, maybe not everybody, but these incredible workouts. And interestingly, it can be profitable for the lender too, you know, or the buyer of that, that note. Like there will 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 not always, 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?

No, Absolutely. There's all kinds of people, entities that can absorb these hits. And it's the 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 consider it a cost of doing business. And the vast majority of people did not fight back. And as a result, it's cost effective to leave it as is. Hopefully 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 into trouble, if anyone who's ever been in trouble with their debts, they'll see all kinds of stuff happens. And many a times it's questionable the practices that are followed.

Yeah, no, it definitely is. And then 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 guard them, don't they?

Absolutely. It's amazing. I mean, we had one of our first clients at Declan's 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, it looked 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, the business with in New 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 businesses are not fighting back.

Yeah. Wow. It's. 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, 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 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, 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. It's crazy.

It is. It really is. And it's funny. And it's not new. This has been going on for generations. You mentioned the.

Well, the Federal Reserve came about over 100 years ago and there were other central bank before that.

You know, Absolutely.

We go back to Rothschild family and the way the whole system works 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 is with debt. And actually, I remember the book the 5000 year, the book that you mentioned at the outset. One of the things they. I actually used 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 nexum, 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 and the hope that they can eventually pay it off 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 or 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. 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.

Let's wrap up with sharing some actionable tips for people.

Sure. Never feel 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. And 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 different loans and mortgages and on properties. But I did borrow the money. I never contested that. So look for those. And then there'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 required an additional witness 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 or if not thousands of loans were generated that had this small error where they were missing a witness. And I know 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 canceled 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.

Yeah. Yeah. Good stuff. Okay, Give out your website, George.

It's debtcleanse again. D E B T Cleanse C L E a n s e.com George Newberry.

Thanks for joining us.

I appreciate it, Jason.

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