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From Collections to Repossession: A Timeline of Debt

Posted: 25 Feb 2019 09:43 AM PST

Sadly, Americans are surprisingly financially illiterate. Many people are unsure of where their money is going, how to manage it and how to get themselves out of financial trouble (i.e., debt), which can have serious and lasting consequences down the line.

"Many debtors ignore requests from [their] debt collector … at their peril," said David Reischer, bankruptcy attorney and CEO of LegalAdvice.com.

When you ignore your debt, business or personal, the consequences start to pile up. The bills get bigger, the anxiety sets in, and then comes shame and depression – and that's just the emotional toll. Debt can lead to bankruptcy, eviction, wage garnishment, foreclosure, repossession, ruined credit scores and broken partnerships. But you can arm yourself with knowledge and prepare to tackle the problem head-on.

Business.com talked to debt experts, financial advisors and bankruptcy lawyers to find out exactly what happens to your debt, from delinquency into collections all the way to repossession, and what you need to do right now to begin to work your way out of the red.

Stage 1: 30 days past due

You are behind on your payment. Your lender likely will call, email or send a letter politely reminding you that your payment is past due and should be submitted as soon as possible. The creditor may reach out to credit reporting bureaus to report your account as delinquent.

What you should do

If you know you are going to miss a payment, proactively reach out to your lender. They may be willing to work with you to formulate a payment plan to get you back on track. If you do miss your payment without notifying your lender, contact them as soon as you realize and work with them to create a repayment plan. Do not just ignore calls and letters. This is when you can still easily rectify the situation.

Stage 2: 60 days past due

Your debt is still with your original lender, but contact will become more aggressive and persistent. The creditor will contact credit reporting bureaus to report your delinquent account, if they have not done so already, and you may be accruing penalty fees.

What you should do

It is not too late to contact your lender to work out a payment or hardship plan. Swift, direct contact is your best course of action.

Stage 3: Charge-off status

The debt has been turned over to a collections agency, and your credit report has likely been updated to reflect you are in arrears. The agency will purchase the debt amount for a fraction of the balance due, usually 30 to 35 percent, said Todd Christensen, community financial educator and manager of Money Fit. He advised being proactive and cautious. After the collection agency purchases the debt for a portion of the balance due, it may contact you to collect the full balance.

"[The collections agency] will never tell the consumer that they only paid a fraction of the balance due," Christensen said. "They just notify the consumer of the balance owed and try to collect as much as possible."

What you should do

To avoid a ruined credit score, you should immediately contact your original creditor (lender, medical office, etc.) and try to set up a repayment plan directly with them. This way, said Christensen, the account may be returned from collections and your credit report saved. He recommends you follow these steps once you are contacted by a collections agency:

1. Ask the collections agency to send you verification of your debt in writing. Do not discuss the debt or payment details any further.

2. Contact the original creditor (the lender, bank, doctor's office, etc.) immediately and work with them to set up a monthly repayment plan you can afford.

3. Ask the original creditor if they can get the account back from the collections agency so it will not report to the consumer reporting agencies and affect your credit rating.

4. Make the payments as agreed to the original creditor.

Stage 4: Court

The collections agency has been unable to contact you and has filed a lawsuit. You will receive a court summons, and it is imperative that you attend the court date. If you don't, it will mean an automatic win for the collections agency.

In court, the judge can pass a money judgment, with which "a creditor that is serious about collecting a debt can then take that money judgment and record a lien against [your] home, levy funds on a bank account, or force the sale of an expensive asset," said Reischer. "A debt collector can execute on the lien and have a marshal or sheriff seize the property and arrange for a public sale from which the creditor is paid out of the proceeds."

What you should do

First and foremost, show up to your court date so that you can dispute the debt. Then ask the judge if they are willing to oversee the creation of a repayment plan instead of choosing a lien, wage garnishment or sale of an asset.

Other useful steps to take

The steps are pretty clear, but there are other actions to take along the way.

1. Verify, verify, verify.

Know who you're speaking to. "Never cave to the pressures of a collection call," said Christensen. "If you do not recognize the debt, always ask for verification, and never give your bank information out."

2. Calculate your DTI.

To stay out of debt, Reischer suggested that you calculate your monthly debt-to-income (DTI) ratio. Never take on debt with monthly payments that exceed 40 percent of your monthly income. "A prudent lender will not lend to a borrower when the DTI ratio becomes very high," he said.  "But it is the borrower's ultimate responsibility to calculate their own DTI ratio to determine whether they are able to repay a loan."

3. Understand the FDCPA.

The Fair Debt Collections Practices Act protects consumers from excessive contact by collections agencies, outlining when and how often they can contact you.

Christensen recalled a client who was receiving harassing phone calls from a collections agency she didn't know. The agency threatened her with legal action and personal contact, which turned out to be unsupported claims that violated the FDCPA. That enabled her, together with an attorney, to send a certified letter to the agency demanding it cease all contact.

If you find yourself in debt, remember to stay calm and focus on resolving it as quickly as possible. Your credit score, property and peace of mind will thank you.

These 3 Legal Issues Can Make or Break Your E-Commerce Startup

Posted: 25 Feb 2019 09:00 AM PST

The e-commerce ecosystem has become one of the most crowded startup spaces over the past few years. In the period between 2012 and 2016, ecommerce startups raked in over $46 billion in funding, with many startups easily closing over $100 million worth of deals. And even after a lackluster funding phase in 2016, funding for ecommerce startups has been on an upward trend since 2017, with only fintech startups creating a bigger buzz within that period.

That growth, however, hasn't come without its challenges. The e-commerce industry, just like every other niche within the tech industry, has had to adapt to an increasingly demanding legal and regulatory environment that has often led to lawsuits, product recalls and even closures in some parts of the world.

For entrepreneurs running e-commerce startups, legal infractions can come in many forms, with each infraction presenting a different challenge for the business. As such, it is vital for every e-commerce outfit to stay ahead of the game when it comes to individual legal responsibilities.

Here are a few things to note when pursuing legal compliance as an e-commerce business.

1. Liability and Contractual Information

Amazon, easily the most recognizable face of the e-commerce industry, has had to navigate the treacherous world of regulation for years. Last year, the company survived a $2 million-dollar lawsuit after a U.S. District Court ruled that the company was not liable for products sold on its website after an online buyer sued the company for injuries sustained by a defective coffeemaker bought from Amazon.com.

For the average e-commerce startup, the Amazon ruling illustrates just how important it is to clearly define product liabilities and warranties, especially if you deal with third-party vendors. You can easily get sued by customers for product defects that have nothing to do with your business, which might see you spending unnecessarily on legal fees while damaging your business' reputation.

As a first step, always ensure your terms of use section is as detailed as possible, making sure customers understand, among other things, your relationship with vendors on the site. Also, ensure you've clearly defined all the technical means available to customers in case they want to cancel or return purchases and make sure you have a mechanism of notifying customers of their purchases within 24 hours of the purchase.  

2. Data Protection and Privacy

Most e-commerce platforms are reservoirs of sensitive customer information, which is often collected via contact forms, customer registration, and during payment for purchases. In many regions around the globe, e-commerce platforms are obliged to protect their customers' data as a requirement for legal compliance.

In the EU, for instance, e-commerce websites are required by the General Data Protection Regulation (GDPR) to notify their visitors when they gather user information and also seek explicit consent before collecting or reusing personal data. Some states in the U.S. require website owners to assign at least one employee to manage internal data protection programs.     

To ensure your e-commerce website is compliant with data protection rules, start by creating a comprehensive data protection policy in addition to your cookies policy. The links to both these policies should be clearly visible on your website and should give your visitors information about whose responsible for storing their data and how they can access, cancel, or modify any of their information.

3. Managing Fraud and Securing Electronic Transactions

Payments fraud and other issues related to online security have become quite popular over the past few years, coinciding with the growth of the ecommerce industry. One report projected that card-not-present (CNP) fraud will grow by 14 percent annually up to 2023, which is a significant figure for ecommerce platforms that accept on-site payments.

So, in addition to protecting your customers' information on your site, it is important to go deeper into the inner workings of your e-commerce site to prevent fraud. One preventative way to ensure your systems run smoothly is application performance management, APM, a product that mirrors an MRI machine by providing insight into your ecommerce system. Gartner defines APM along three main veins that touch on application diagnostics, experience monitoring, and analytics, which all help to identify and fix vulnerabilities within your system before getting into problems with your users and, eventually, the law.    

But when you do get hacked, you're legally obliged to inform the public. Many countries require businesses to report any breach to the public, especially one that deals with personal and sensitive user data. In the U.S., for instance, most states will require businesses to report any data breach to its residents within 45 days, though this varies from state to state. So, always be sure to stay on the safe side of the law when you suspect a breach, even when you're tempted to sweep it under the carpet.

Just because your customers don't walk through a physical store doesn't mean your e-commerce platform is above the law. Take time to ensure your online store meets stipulated legislation across all jurisdictions that your products or services are available to potential customers. These measures, while simple, might save your business from costly litigation and eventual loss of brand reputation when you're found on the wrong side of the law. 

5 Reasons Why 2019 is the Best Year Yet to Start a Business

Posted: 25 Feb 2019 07:00 AM PST

There's no denying it – the startup life is tough. It's a full-time grind that requires complete dedication and focus while relying on extremely limited time and resources.

That being said, there are many ways in which the broader business world has grown more aware of not only the needs of startups but also their unique value. This awareness has now manifested itself in an ever-increasing pool of resources, tools, programs, softwares, pricing plans and more that are curated specifically for startups.

Here are five reasons 2019 is the best year to be a startup.

1. It's never been more affordable to start a company.

As recent as 10 years ago, there were many costs involved in founding a startup that made it prohibitively expensive for most people to accomplish without significant funding. Today, many of those costs have been reduced by new advancements, processes and infrastructure. From a cost perspective, it's simply never been easier to start a company, with so many DIY software programs, educational resources and low-cost coworking spaces.

2. The power dynamic has continued to shift from investors to entrepreneurs.

When it comes to investing in startups, most people assume that investors hold all the power – after all they are the individuals with all the money. However, in the current startup climate, this isn't exactly the case. Startups describe having more power than ever before. In fact, First Round's "State of Startups: 2018" reported that 59.1 percent of founders who believe that, over the past year, the power has generally been in the hands of entrepreneurs rather than investors.

3. Access to free, high-quality startup resources and knowledge is easier than ever before.

Changes to technology in recent decades have opened up access to startup-oriented content at a dramatic scale. Startups are now able to easily share their learnings with each other across the globe in a constant knowledge share. In addition, as more individuals and organizations realize the value of startups, they have dramatically increased the amount of startup content that exists.

At this point there is virtually an endless amount of content that startups can learn and grow from. No matter what challenge your startup is facing at any given moment, chances are that there is some tool, resource, or document that can help you work through the problem. At the very least, you will likely be able to find someone else's take on how they tackled the problem, which can be tremendously valuable.

The old adage in business is often that you should watch your competitors but not follow them, and while this absolutely true, it doesn't mean that there aren't countless other companies whose example you should follow. In fact, there are many cases when following others is exactly the right thing to do. When a successful startup in another industry has found a process or software or strategy that works for them, why not try it out in your own use case (the caveat being that it makes sense in your situation).

4. More startup oriented programs and discounts are offered every day.

The traditional view of startups has been that only select number of companies, individuals or VCs are lucky enough to get in on the ground floor of successful startups and share in their success, but this isn't actually the case. There are countless ways to invest in a startup that are slightly less "typical," and many companies are realizing this and starting to take advantage of it. These companies recognize that if they offer their product at a steep discount (or for free) when a startup is small they can increase their prices (and profits) as the startup begins to see success and scale. 

5. VC funding has continued to rise dramatically in the past few years

The amount of dollars invested in startups in 2018 reached its highest year since the dotcom era. With VC funding amounting to $99.5 billion in 2018, this is a great sign that investors are taking more risks and investing in more companies. In addition, GeekWire reports that a record 53 companies' valuations superseded $1 billion in 2018. All of these are signs of good health and opportunity within the startup community.

How to take advantage of the unique opportunities offered to startups

Now, just because all these great resources exist for startups doesn't mean that working at a startup is a breeze. It's still an incredibly tough grind that has its own unique set of challenges and obstacles. These resources also don't mean much for your startup if you don't take advantage of them. Working at a startup requires one to always be vigilant of what low-cost opportunities are out there, just waiting to be taken. 

Hiring Freelancers for Your Startup? Consider These Pros and Cons

Posted: 25 Feb 2019 05:00 AM PST

To get a new business off the ground, it's important to keep the speed and quality of development at a high rate while balancing the costs. This is why startup founders are always on the hunt for diverse, cost-effective talent, which often draws them to freelancers.

There are a lot of good reasons to hire freelance talent, instead of investing in full-time employees right away. However, working with contractors does come with some risks. Here are some important pros and cons to consider if you are thinking about hiring freelancers to help you grow your startup.

The Benefits of Hiring Freelancers

Availability

Today the process of finding and hiring freelancers has become rather quick and painless, especially with the rise of platforms that assist in finding and hiring workers online. Such platforms enable business owners to streamline the entire hiring lifecycle, from posting job offers to selecting and working with the best-fit candidates. You are also able to track your freelancer's performance and choose a convenient payment model (hourly rate or fixed price) depending on the scope of work you need.

Moreover, cooperation with a freelance developer provides the desired level of flexibility -- you can end it at any time convenient for you and find a new freelancer without dealing with paperwork.

Diversity

Hiring a freelancer means having the freedom of choice among diverse skill sets. You are able to find workers specializing in even in the most hard-to-find technologies, or with background experience in emerging areas such as AI, data science, machine learning, IoT, etc. Moreover, with freelancers, you are not limited to one location -- you have the power to search globally. This is especially relevant for countries such as the US and UK where the demand for tech talent exceeds the local supply.

Cost

Another benefit of hiring freelancers is the price of services. According to the Global Freelance Income survey, the average hourly rate of a freelance web programmer is $21, a mobile developer, $23; and a game developer, $24. The average offshore developer rate reaches up to $50 in Central, South America and Eastern Europe and up to $40 in Asia and Africa.

What's more, when working with freelancers, you are free from extra charges which usually cover infrastructure set up, health insurance, sick leaves and other expenses related to hiring in-house employees.

The Risks of a Freelance Workforce

Missed deadlines

Many freelancers juggle multiple projects at once to make the most out of their time. However, oftentimes, they can't realistically evaluate the scope and timing required to complete each separate task and simply put too much on their plate.

To cope with a growing amount of work, they focus most of their time and energy on projects which offer higher wages or have a deadline coming up. Consequently, they may start falling behind schedule with other responsibilities and miss their deadlines.

Moreover, due to the heavy workload and irregular schedule of freelancers, their response time to urgent requests is often lower compared to your in-house employees.

Lack of commitment

Low commitment is a common issue among remote freelance employees. Due to the vast availability of choices and lack of contractual obligations, they may abruptly quit your project in favor of another or keep it on the back burner until the deadlines start burning. What's more, some freelancers may not have a stable internet connection or all of the necessary software, which also affects timely project delivery.

Of course, your in-house employees do not always guarantee a 100 percent success rate, either. However, thanks to direct communication, regular performance reviews and a variety of perks, they are often more inclined to dedicate all of their efforts to your project and its future enhancement.

Security

Transparency and security should be considered top priority for startup founders working with remote freelance employees. According to the Risk Value 2018 report, around 60 percent of respondents named temporary employees and contractors as the weakest security link within the organization. No wonder, as freelancers you work with have access to your company's systems, data repositories, and process documents.

Remote cooperation often limits your ability to control the entire process. Therefore, it's important to set clear security guidelines you want your freelancer to follow, as well as conduct regular checks to ensure your assets are kept safe.

Tips on effective cooperation with freelance workers

If you do decide to hire freelance contractors to help you grow your business, here are a few important tips to follow for a solid working relationship:

  • Ask your colleagues for recommendations or contact an experienced staffing company to provide you with a base of reliable and vetted freelancers.

  • Use platforms that provide guarantees and examine the online reviews and former work experience of potential candidates. Cooperation via freelance workplaces also simplifies the payment process between different locations.

  • Explore the market specifics of your target country and consider the time and cultural differences before making any hiring decisions.

  • Try to keep your team stable -- work with trusted freelancers on a long-term basis instead of constantly engaging new people.

  • Keep your communication lines open and arrange regular standups and video calls to ensure everyone is on the same page.

  • Use a set of tools for task tracking, continuous integration and shared repositories to keep track of the team's progress.

  • Create a hybrid team-chat where your dedicated employees can communicate with freelancers to maintain a sense of integrity between remote and in-house employees.

Overall, cooperation with freelancers entails both benefits and drawbacks. Some of them might not live up to their promises or meet your expectations, while others might help you solve a myriad of critical and urgent issues in a matter of days. However, by following the above-mentioned tips, you'll be able to avoid a number of pitfalls and drive maximum value from working with freelance specialists.
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