The Rolling Jubilee Mails its First Debt Forgiveness Letters

Categories: Debt

RollingJubileeGiftBox1.jpg
Strike Debt activists with the first debt-forgiveness package they're sending out.
When the debt activism group Strike Debt began planning its Rolling Jubilee, the goal was relatively modest: They would raise $50,000, use it to buy distressed medical debt on secondary debt markets, and then, rather than hounding the debtors like the collection agencies that buy most of this sort of debt, they would wipe it out.

But that was before the Rolling Jubilee caught fire in the public imagination, garnering attention from the likes of Boing Boing, the New York Times, and Fortune Magazine. Even before the group had webcast its star-studded telethon, it had already surpassed its fundraising goal. To date, they've raised nearly half a million dollars -- enough to buy and forgive nearly $10 million of debt.

Most of that money is going to go to purchasing a big hunk of distressed medical debt next month, but as a sort of proof-of-concept, Strike Debt has already spent $5,000 to buy $100,000 of distressed medical debt owed by 44 people in upstate New York.

Yesterday, the activists gathered to send out the notifications to the unsuspecting recipients of this first round of debt forgiveness. Since aggressive collection mailings often drive debtors to ignore envelopes they don't recognize, the forgiveness letters are packaged in a small box wrapped in festive paper.

"We want to make sure they open it," said Yates McKee of Strike Debt. "We also like the idea of it having a holiday feeling to it."

"Seasons Greetings from Strike Debt!" begins the letter.

"We write with good news: the above referenced account has been purchased by the Rolling Jubilee Fund, a 501(c)(4) non-profit organization. The Rolling Jubilee Fund is a project of Strike Debt. The mission of this project is to buy and abolish personal debt. We believe that no one should have to go into debt for the basic things in our lives, like healthcare, housing, and education.

You no longer owe the balance of this debt. It is gone, a gift with no strings attached. You are no longer any obligation to settle this account with the original creditor, the bill collector, or anyone else."

RollingJubileeGiftBox2.jpg
A debt-forgiveness box ready for mailing.
After the first flush of positive press, the Rolling Jubilee has encountered some skepticism. Yves Smith of the Naked Capitalism blog has called it "a gimmick with a tax risk." The jubilee puts borrowers at risk, Smith argues, because forgiving the debt could be counted as a taxable windfall for the debtors, potentially making their situation worse rather than better. Strike Debt's claim that the jubilee won't have tax implications are dubious, Smith argues, because 1) by buying the debt in the first place, Strike Debt is engaging in commercial activity, 2) the recipients are likely to be middle class, and therefore ineligible for tax exemption as a "charitable class." She concludes:

"Sophisticated taxpayers get tax opinions from law firms with recognized expertise in tax matters, or ask for rulings from IRS (a non-starter here), or document their positions with heavily researched memos. Rolling Jubilee should get one of its sympathetic celebrites to write a check to a serious tax lawyer to take a proper look."

Rolling Jubilee organizers say that's exactly what they've done. "I'm a little mystified by the critiques based on the tax implications," says the tax lawyer who has been advising Strike Debt. (The lawyer works in the tax department at a top international law firm -- her employer knows she is advising Strike Debt, but doesn't want its name attached to the project.)

The tax lawyer dismisses the concern that the Rolling Jubilee is engaged in commercial activity: "It doesn't make a great deal of sense to me," she said. "When Habitat for Humanity is helping people build houses, someone still has to buy the lumber. It doesn't change their tax status. The critical thing is that this is a not-for-profit organization, and it's not engaged in trying to make money."

Furthermore, the lawyer says, recipients don't have to be poor to receive tax-free debt forgiveness. "This is focused on medical debt," she says, "and people with health problems can be categorized as distressed. You don't need to show that they're impoverished."

Even if it doesn't run afoul of tax laws, the campaign's organizers acknowledge that $10 million of debt is a drop in the bucket, hardly enough to overturn a global system producing every greater amounts of crushing debt. The larger goal, they say, is to start a conversation about the way that debt plays in society. "This is a social hack," says Laura Hanna of Strike Debt. "A lot of people didn't know that their debts were on fire sale, that their debts could be bought for pennies on the dollar, just not by them."

What the Strike Debt will do with the conversation it has started is something they're still figuring out. In recent months chapters have sprung up in cities across the country, and organizers are planning a national conversation about next steps pegged to Martin Luther King's birthday.

In the meantime, they have at least two more debt buys planned in the coming months.

[npinto@villagevoice.com] [@macfathom]

Go to Runnin' Scared for all our latest news coverage.



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60 comments
kelly7400
kelly7400

I contacted Rolling Jubilee a while back about them buying my debt. They were unable to assure me that I wouldn't have to pay taxes on the full amount. I talked to my tax preparer and a lawyer and they both said I'd be liable for taxes on the full amount if I, or anyone paid a fraction of the debt to the collection agency. I just don't see how these people will be exempt from taxes. They're going to get a second letter from the IRS that will be very unpleasant. And you can't escape the IRS as easily as a doctor's bill.

StrikeDebt
StrikeDebt

@joerotondi Debt collectors buy debts for pennies on the dollar. We're just stepping in and buying it before they do. But we don't collect.

sblackmoore
sblackmoore

@ramez So happy to see this happening.

ChristineBaker
ChristineBaker

This is an promotion for a FOR PROFIT CREDIT REPAIR COMPANY, they give AWFUL advice in their manual and the entire approach is as idiotic as it gets.  

This could have been a good initiative with the intent to truly educated the average Joe and to teach people in debt how to FIGHT or, if they aren't fighters, how to minimize the impact of collections on their lives.

It is so depressing to see how NOTHING is what it appears to be and every so-called activist organization is infiltrated by the bankers (or they are just naturally stupid.)

SUCKERS!

http://liarsandcheats.info/blog/2012/11/12/fraud-scam-alert-owc-strike-debt-rolling-jubilee-for-profit- credit-repair-ploy/

Jazpuh
Jazpuh

@kissane @catie_mac what a wonderful initiative.

Selina Grissom
Selina Grissom

Very cool...now if they could just make my mortgage disappear...I'm scared to death of being homeless on a daily basis...

tweck72
tweck72

Does the voice have editors?  Do you take the time to proofread your articles?  There are at least two glaring grammatical errors in this article.  It would behoove you to have a little more quality control.

AManCalledMax
AManCalledMax

@PurpleGreenRob What a fantastic idea! Ho ho ho.

carpetbomberz
carpetbomberz

@kissane I think of it as Occupy Debt. The next big wave.

superterrific
superterrific

@jnchapel glad the tax issues seems like a non-starter

GlennF
GlennF

@kissane @KuraFire Oh, I like the tax info. They hadn't addressed that initially. What a marvelous idea.

Tupp_Ed
Tupp_Ed

@nmcgivney Not sure if you get the same deep discount on debt here.

zearl
zearl

@kissane Kept seeing your handle pop up in the corner as I was reading that article — thanks for spreading the word!

jordangray
jordangray

@kissane Oh, Erin, this is too wonderful. Thank you for that. :)

hsaffari
hsaffari

@kissane if that's legal of course.

hsaffari
hsaffari

@kissane Wondering if people could be educated to buy their own debt back since it can be purchased for pennies on the dollar?

murtaugh
murtaugh

@kissane @wilto a live, sticky comment module. goes against my beliefs but on a nice article like this it’s quite cool: http://t.co/F1BVxH6X

CodeItPretty
CodeItPretty

@kissane thank you for some good news. I needed to see this

wilto
wilto

@kissane Man, did I need to hear that The Good Guys were still here somewhere.

gotoplanb
gotoplanb

@kissane This warms my heart.

vivian.lake
vivian.lake

upstate New York?? How about the more economically challenged five boroughs? 

Nobody
Nobody

I donated! Happy holidays everyone! I hope this helps someone out!

eternal_lifejoy
eternal_lifejoy

@brookejarvis @allisonkilkenny @SWFSeeking wonderful news, wonderful to read such encouraging good news..:)

JFTAXI
JFTAXI

Its certainly a tactic that groups of people in debt should explore, (especially people with mortgages) @LegalEagleStar @villagevoice

ptracer54
ptracer54

Yves Smith of the Naked Capitalism blog is incorrect that forgiven medical debt would have to be reported to the IRS. Medical debt is not a loan and is not subject to the 1099-c requirements. As to consumer debts, credit card debt, payday loans, etc. There are other reasons that Rolling Jubilee would not have to file a 1099-c. I will just stick with the medical for now.

drewveysey
drewveysey

@allisonkilkenny there's no mention if letters associate the campaign with the #occupy movement at all

dwangelo
dwangelo

@StrikeDebt @joerotondi who do you buy it from and are you now a licensed debt collector in your state?

ramez
ramez

@sblackmoore And yes, very impressed with Rolling Jubilee!

ramez
ramez

@sblackmoore Thank you. :) Mutual congrats!

jnchapel
jnchapel

@superterrific Yes, that was the one criticism that seemed to have substance. It's great news that taxes aren't an issue. Go, Strike Debt!

kissane
kissane

@GlennF @KuraFire They have some ridiculously smart, savvy finance people involved. It's kind of intense.

KuraFire
KuraFire

@GlennF Same here; I was (somewhat) skeptical for that reason until this article. +@kissane

nmcgivney
nmcgivney

@Tupp_Ed I think it's pretty clear. We won't. Or some schmoe in an all night Dail think-in will tell the IMF that we'll relieve THEIR debt.

kissane
kissane

@zearl I am so in love with Rolling Jubilee.

StrikeDebt
StrikeDebt

@hsaffari Unfortunately, it's more complicated than that. Debts are sold in large bundles, unless you're a billionaire: http://t.co/ffdP3yWm

kissane
kissane

@hsaffari That's the great thing about mutual aid projects like Rolling Jubilee—they're breaking that legal ground.

jungshadow
jungshadow

@wilto @kissane Especially good to hear after reading that harrowing Wired article on OWS.

DiceyTroop
DiceyTroop

@drewveysey oh the article doesn't mention that the ops manual is included with the letter. but that's why this wasn't a non-sequitur. ha.

DiceyTroop
DiceyTroop

@drewveysey even if the letters don't, the debt resistors ops manual clearly identifies strike debt as a project of #OWS, et al. just fyi (:

hsaffari
hsaffari

@StrikeDebt Right, of course.

scormeny
scormeny

@StrikeDebt but I do love your Debt Resistors' Ops Manual for great advice on negotiating to avoid or reduce debt. http://t.co/IpcsWGeG

kissane
kissane

@jungshadow @wilto Oh god yes.

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