Debt Settlement Company or a Lawyer – Which One Works the Best?
If simple things like making budgets, making changes in your lifestyle to save more or even consolidating debts have not worked then maybe it is time that you looked to settling your debts as a last resort before filing for bankruptcy. While technically, there is nothing to prevent you from negotiating with your creditors on your own, it is often suggested that engaging a debt settlement company or a lawyer could be better as they have a lot of experience that they can use to bring down the amount of the debt and give you a better saving.
Debt settlement has acquired a certain amount of notoriety due to some unscrupulous companies swindling customers. However, the American Fair Credit Council (AFCC) has published a report (https://americanfaircreditcouncil.org/wp-content/uploads/Regan-Report-Short-Version-FINAL-AFCC-Brand.pdf) stating that after an analysis of 2.9 million debt accounts of 400,000 clients, it was clear that “for consumers who qualify, debt settlement offers significant financial and structural advantages over other alternatives.” On the other hand, many people are also skeptical of engaging lawyers, as they fear that the costs of hiring them can mean a serious drain on the resources.
The Rationale of Debt Settlement
Most people are confused by the shrill advertising by debt settlement companies promising to slash their debts by half or even more and wonder how that can be even possible. However, when pursued by collection agents, these advertisements become very attractive and people approach them to manage their debts without really bothering to find out how it all works. Firstly, debt settlement only works if the debt you have accumulated is unsecured. This is because if you default on a secured asset like a car, it can easily be repossessed by the financier and sold off to realize the outstanding so the need for debt management does not arise. If you have a lot of unsecured debt that you are unable to make the monthly payments on, you can by yourself or through a debt management company request the lenders to reduce the debt so that you can pay them back and not continuously default. If you can convince them that you are indeed headed towards bankruptcy if they do not agree for debt settlement, they will naturally try to settle as best as they can because they know that they will never get their money back if the customer files for bankruptcy. Click here to know more about debt relief.
The Process of Debt Settlement
Typically, when you undertake debt settlement by a debt management company, you are required to give them the details of all the debt that are outstanding. The debt management company asks you not to make any monthly payments to the card companies and instead, deposit the payments in a special account set up for this express purpose. Typically, the payments you deposit into the account every month is used to build a corpus of funds that will be used by the debt settlement company to encourage the lenders to settle. If the customer has agreed to any monthly fees to be paid, it will be deducted from that account. By law, the debt settlement company cannot ask for any fees upfront and will generally earn their fees contingent to the debts being settled; the fee will normally be a certain percent of the savings achieved through the settlement process. According to the AFCC, debt settlement (https://americanfaircreditcouncil.org/wp-content/uploads/Regan-Report-Short-Version-FINAL-AFCC-Brand.pdf) on an average saves consumers $2.64 for every $1 in fees paid.
Secrets That Debt Settlement Companies Usually Do Not Reveal to Customers
Debt settlement companies tend to omit to mention to their customers that once they stop making their monthly payments to the card companies, their dues will not only swell due to the interest and late fee charges but also that your credit score will take a hit. It is also often taken for granted that customers know that creditors are not bound to accept any offers of settlement. In fact, many card companies immediately file a lawsuit against the cardholder if the account is already delinquent upon discovering an approach has been made by a debt settlement company.
Benefits of Hiring a Lawyer
If you are convinced that you do not have the skills to negotiate a debt settlement all by yourself and also do not want to engage a debt settlement company, you can consider hiring a lawyer instead to help you out. A lawyer experienced in debt negotiation can analyze your financial situation and offer you advice on how best to sort it out. They can also represent you in court if you are served a notice by the card company. After scrutinizing your case, an attorney will be able to tell you if debt settlement is viable or if you need to file for bankruptcy. A lawyer will also be able to inform you of your rights when debt collectors come calling and what to do if they violate the provisions of the Fair Debt Collection Practices Act.
Beware Of Unscrupulous Lawyers
Even though lawyers have a code of conduct and need to be ethical when dealing with their clients, there are many who will try to rip off their customers with bad advice and unnecessary fees. You need to also stay away from lawyers, who are conspiring with debt settlement companies or actually in their rolls; who might really not be interested in getting you a fair deal. It is best to hire a lawyer who has been recommended to you by someone you trust and speak with him directly to find out what his scope of involvement will be. Try to speak to the person who will actually represent you and not to the army of paralegals kept for handling the paperwork.
If you are cornered, debt settlement can be a practical way of reducing your debt substantially. Whether you do it by yourself, or engage a debt settlement company or hire a lawyer depends on your level of comfort. You must ensure that you are dealing with genuine people to solve a genuine problem otherwise; you could find yourself in a bigger problem.