The Promissory Note Loophole: Tommy Kilpatrick's Debt Elimination Strategy

In this blog post, we're diving deep into a controversial topic: the "Promissory Note Loophole," championed by Tommy Kilpatrick. Kilpatrick argues that credit card debt isn't a true loan without a signed promissory note and that individuals can potentially eliminate their debts by understanding this concept. We'll explore his story, his legal battles with banks, and his claims about replicating his results. But before we get started, listen to the related episode where we interview Tommy Kilpatrick himself: Tommy Kilpatrick. You can also find the episode show notes below:

After publishing a successful book, Tommy Kilpatrick was contracted with an infomercial company and spent six months promoting it—living on three credit cards in anticipation of earning $100,000 a month. When another author with the company faced legal trouble, all new contracts were canceled, leaving Kilpatrick with $85,000 in credit card debt.

Drawing on his accounting background, Kilpatrick concluded that bank-issued credit cards are not true loans without a signed promissory note. He sued three banks in federal court, and although the cases were dismissed, the debts were removed from his credit report with no derogatory marks or IRS 1099-C filings.

Kilpatrick now educates audiences on the claim that, without a promissory note, no actual bank loan or debt exists—only a bookkeeping entry—and outlines how individuals might use this principle to eliminate similar debts.

Introduction: Who is Tommy Kilpatrick and What is the Promissory Note Loophole?

Tommy Kilpatrick is an author and educator who gained attention for his controversial approach to dealing with credit card debt. He's not a lawyer, but he has a background in accounting, which he leverages to argue that credit card debt is fundamentally different from traditional loans. He contends that the absence of a signed promissory note transforms the relationship between cardholder and bank from a lender-borrower scenario to something more akin to a bookkeeping entry.

The "Promissory Note Loophole," as Kilpatrick calls it, centers around the idea that a valid loan requires a promissory note – a written and signed agreement promising to repay a specific sum of money with specified terms. Kilpatrick argues that credit card agreements don't meet this definition, as they are often unilateral contracts where the cardholder agrees to the bank's terms, but no promissory note is signed. Therefore, he claims, no actual debt exists in the traditional sense. This concept has made him a figure of interest for those struggling with debt and seeking alternative strategies.

Kilpatrick's Story: From Infomercial Dreams to $85,000 in Debt

Kilpatrick's journey into the world of debt elimination began with a promising business venture. After the successful publication of a book, Kilpatrick was hired by an infomercial company and spent six months promoting it. He anticipated earning $100,000 per month and, in anticipation of these riches, funded his living expenses and business operations with credit cards. He racked up a substantial amount of debt—around $85,000—across three credit cards.

Unfortunately, his plans were derailed when another author associated with the infomercial company encountered legal troubles. This led to the cancellation of all new contracts, leaving Kilpatrick with a significant amount of credit card debt and no income to pay it off. It was at this point that Kilpatrick began to delve into the legal aspects of credit card agreements and developed his now-famous theory.

The Promissory Note Argument: Credit Cards as Bookkeeping Entries?

Kilpatrick's central argument rests on the assertion that credit cards do not constitute a valid loan because they lack a signed promissory note. According to Kilpatrick, a true loan requires both parties to agree on the terms of repayment and demonstrate this agreement by signing a legally binding document—the promissory note. This note outlines the amount borrowed, the interest rate, the repayment schedule, and other crucial details.

Kilpatrick claims that credit card agreements are different. While cardholders agree to the terms and conditions set by the bank, they don't sign a promissory note acknowledging a specific loan amount. He views credit card transactions more as bookkeeping entries—records of transactions facilitated by the bank. Without a promissory note, Kilpatrick argues, there is no proof of a legitimate loan, and thus, no legal obligation to repay the debt.

He posits that banks operate a system of fractional reserve lending, creating money out of thin air. Without a promissory note, it becomes challenging to prove that the bank actually loaned out existing money. Instead, Kilpatrick suggests, the bank is simply creating credit on its books, which is fundamentally different from a traditional loan.

Legal Battles: Suing the Banks and the Outcome

Driven by his belief in the Promissory Note Loophole, Kilpatrick decided to take his argument to the legal system. He sued three banks in federal court, arguing that his credit card debts were invalid due to the absence of a signed promissory note. These lawsuits were intended to challenge the conventional understanding of credit card debt and potentially set a precedent for others in similar situations.

While Kilpatrick's legal challenges generated considerable attention, the cases were ultimately dismissed. The courts did not rule in his favor, and the judges did not endorse his Promissory Note Loophole theory. However, despite the dismissal, Kilpatrick claims that the debts were removed from his credit report without any derogatory marks or IRS 1099-C filings (Cancellation of Debt income). This outcome, according to Kilpatrick, is a testament to the validity of his arguments.

It's important to note that the reasons for the debt removal are not entirely clear. The banks may have chosen to settle or write off the debt rather than pursue further legal action, especially given the costs associated with litigation. Additionally, the removal of negative information from a credit report doesn't necessarily mean that the debt is legally extinguished. The debt could still exist, and the bank could potentially pursue other avenues for collection.

Debt Elimination Claims: How Kilpatrick Says You Can Replicate His Results

Based on his experiences and his interpretation of the legal framework surrounding credit card debt, Kilpatrick now teaches others how to potentially replicate his results. He provides resources and guidance on how to challenge credit card debts using the Promissory Note Loophole argument. He outlines a process that involves sending specific letters to creditors and potentially pursuing legal action if necessary.

Kilpatrick advises individuals to request proof of the original loan agreement, including a signed promissory note. If the bank cannot produce this document, he argues that the debt is invalid. He also encourages people to thoroughly research their state's laws regarding contracts and lending practices.

It's crucial to approach these claims with caution. While Kilpatrick's approach may have worked for him in specific circumstances, there is no guarantee that it will work for everyone. The legal landscape surrounding debt and credit card agreements is complex and constantly evolving. It's essential to consult with legal professionals to understand your rights and obligations.

Disclaimer: Is This Legal Advice?

Let's be clear: the information presented in this blog post, and the opinions expressed by Tommy Kilpatrick, should not be considered legal advice. We are exploring a controversial theory and presenting Kilpatrick's perspective. This is for informational purposes only and should not be used as a substitute for consulting with a qualified attorney or financial advisor.

The laws governing debt, contracts, and lending practices vary from state to state and can be subject to change. What might have worked in Kilpatrick's situation may not be applicable in your specific jurisdiction. Before taking any action regarding your debts, it's crucial to seek professional guidance to ensure that you are making informed decisions that are in your best interest.

Engaging with these strategies can have consequences, including potential legal action from creditors, damage to your credit score, and the risk of being held liable for the debt. Always weigh the potential risks and benefits before pursuing any debt elimination strategy.

Conclusion: Exploring the Controversy and Potential Implications

Tommy Kilpatrick's Promissory Note Loophole is undoubtedly a controversial topic. His argument that credit card debt is not a true loan without a signed promissory note challenges conventional wisdom and has attracted both supporters and critics. While his legal battles did not result in a court victory, he maintains that his approach led to the removal of debts from his credit report.

Kilpatrick's claims raise important questions about the nature of debt and the responsibilities of lenders and borrowers. Whether or not his theory is legally sound, it has sparked a conversation about the transparency and fairness of the credit card industry. It forces us to consider the fine print and understand the agreements we enter into when using credit cards.

It's important to remember that seeking professional legal and financial advice is essential before taking any action related to debt. Kilpatrick's approach may not be suitable for everyone, and it's crucial to understand the potential risks and consequences involved. Ultimately, the Promissory Note Loophole remains a contentious issue, and individuals must carefully evaluate the information and seek expert guidance before making any decisions.

For more in-depth information and a firsthand account of Tommy Kilpatrick's experiences, be sure to listen to the full episode: Tommy Kilpatrick.