Debt collectors The regular calls from creditors were stressful as it was. His wages were garnished and he faced a foreclosure suit on his home.
turn counselors
James Tharp and Ella Liu team
up to help clients get bills paidBy Rick Daysog
rdaysog@starbulletin.comBut instead of filing for personal bankruptcy, the debtor turned to Aloha Credit Counseling, a nonprofit debt counseling and debt management firm.
The agency was not only able to stave off the foreclosure action but was able to reduce his monthly debt payments by more than half, said James Tharp, who co-founded Aloha Credit Counseling with partner Ella Liu.
"Most people who call us are already under an adverse situation," said Tharp. "They're under heavy stress and are looking for relief."
Tharp and Liu know what it's like to work for the other side.
Both spent a considerable amount of their careers in the debt collection business before joining forces in January to found Aloha Credit Counseling, a nonprofit agency that provides debt counseling and management services.
Prior experience showed them there's a huge demand for debt counseling services here.
Since the beginning of the year, Tharp and Liu have seen a steady increase in the number of stressed out debtors.
The isle's high cost of living, job losses, divorce and the easy access to credit cards are big reasons Hawaii consumers flock to the bankruptcy courts.
"Personal indebtedness has become a major social problem," said Tharp, an attorney specializing in debt-related litigation. "People can get so immerse in debt that they become depressed and desperate."
At Aloha Credit Counseling, the goal is to head off consumers who might seek bankruptcy protection by providing credit counseling, creditor advocacy and personalized debt management services.
In the counseling portion, Liu and Tharp try to identify debtors' fixed and flexible cost, which will allow them to maintain a budget. This service, which is free, is full of practical advice on cutting costs.
Some of the tips are as simple as limiting the use of credit cards. About three-quarters of the cases they see involve credit card debts. Over the years, credit card issuers have aggressively marketed their products, some times to people who probably shouldn't have been issued cards. And once the credit card debt is 45 days past-due, some of the issuers will assign the debt to a collection agency.
President: Jim Tharp Aloha Credit Counseling
General Manager: Ella Liu
Founded: January 2001
Employees: 4
Phone: 682-5642
"Most people who come see us are in this type of situation, Liu said.
The credit card holders aren't entirely without blame.
Liu said that one elderly client came to her recently complaining that his credit card expenses were too high. When she examined his receipts, she found that the gentleman, whom she calls "grandpa," ran up $80,000 in charges at local hostess bars.
"I prayed with him," Liu chuckled.
The debt management portion is a much more involved process.
For a fee of $15, Aloha Credit Counseling will serve as the debtor's advocate in disputes with creditors.
Here's where Tharp's and Liu's expertise comes in handy.
Over the years, Tharp has represented dozens of local creditors and has recovered about $5 million in delinquent mortgages and other bad loans. Liu previously supervised a team of 31 collection workers at one of the state's largest collection agencies.
In other words, they know what will and won't fly with creditors.
Sometimes they're able to get creditors to waive late fees and other penalties. In other cases, they can talk the creditor into reducing monthly payments.
Local CPA Gerald Miura said joined Aloha Credit Counseling's board because he believes there's a big void in debt counseling field.
Earlier this year, the head of Hawaii Credit Counseling, Mike Haxton, was indicted on federal money laundering and drug charges. According to the indictment Haxton asked Hawaii Credit Counseling's unsuspecting clients to pay in cash in order to help launder the proceeds of their drug operation.
Haxton has pleaded not guilty and Hawaii Credit Counseling has since been placed under new management.
Paul Okimoto, accountant for New Hope Christian Fellowship on Oahu, said he's referred about a dozen church members to Aloha Credit Counseling since April.He said he's encouraged in that the agency attempts to instill clients with the discipline to reduce their debts and remain fiscally responsible.
"Without people like (Ella Liu and Jim Tharp), a lot of these people would end up giving up and filing for bankruptcy which doesn't do anything good for everyone," Okimoto said.
Tips on lowing consumer debt:
>> Come up with a monthly budget that details your fixed and flexible expenses. This will allow you to prioritize your flexible costs and eliminate unnecessary ones.>> Shop for best rates on fixed costs such as auto insurance, homeowners insurance and banking services.
>> Buy generic prescription drugs and consider shopping on the Internet or through mail order.
>> If you have to use a credit card, use it only for emergencies.
>> Pay your credit card balance monthly. Unless you do this, interest rates and late fees can accumulate to the point that the consumer exceeds their credit limit. Depending on their account balance, consumers can save up to a thousand dollars a year.
>> If you can, use a debit card instead of a credit card. The debit card works like your checking account in that it takes money out of your account whenever you make a purchase. If there's no cash in the account, you can't charge the purchase.
>> Treat your home budget like business. Just like you would not want your business to fail, you certainly don't want your household finance to fail.
Source: Aloha Credit Counseling