Many debt settlement companies and lawyers advertise debt settlements on the internet and on the radio. But how can you tell which companies or lawyers to trust? The first thing you should do is learn what a debt settlement is and what a debt settlement is not.
This article discusses debt settlement and discuss some of the important considerations and red flags when dealing with debt settlement companies or lawyers.
First . . . what is a debt settlement?
In a nutshell, debt settlement is a private, out of court agreement with a creditor or debt collector (e.g., bank, mortgage company, credit card company) to pay less than the full balance. Debt settlement can be a lump sum payment for less than the full balance owed, or monthly payments for less than the full balance owed.
Is this legal?
We learned in contracts 101 that an agreement lacking consideration is unenforceable so is this a concern? No. Let's use a standard credit card debt settlement as an example. First, the consumer does not concede the amount owing on their credit card is true and correct. Second, the repayment schedule is altered such that lump sum payments are received sooner and in greater amounts than they would otherwise be due under the credit card agreement. This is generally adequate consideration to achieve a credit card debt settlement.
How do I qualify a debt settlement?
There is no way to qualify for a debt settlement, per se. In theory, anyone can settle a debt with their credit card company or mortgage lender for any amount and on any terms. However, in practice, debt settlement depends on many factors that make the odds of achieving a debt settlement more likely or less likely.
Factors that can make you a candidate for debt settlement include the following:
Who should I trust?
Yourself. Doing your own research is invaluable and will help you become more comfortable dealing with your creditors or helping you select a debt settlement company or lawyers. Many companies will market their services for a fixed or flat fee or monthly fees. You do not need to pay these companies one cent. Many consumers can achieve debt settlements without the assistance of others by simply calling their creditors and asking whether a debt settlement or alternative payment arrangement is available.
When should you seek help?
You should seek help if you have high credit card balances or financial hardship. You should seek help whether you are current or behind on your payments to creditrs. You should also seek help if creditors or debt collectors are harassing you by calling your mobile telephone, or threatening you.
What are some red flags?
Companies that demand payment up front. This is a huge red flag. Many companies will market their services for a fixed fee, or monthly fees (we will discuss the latter below). You do not need to pay companies up front for these services. Many consumers can achieve debt settlements by simply calling their creditor and asking whether a debt settlement or alternative payment arrangement is available.
Another red flag is debt settlement companies or lawyers that make too many promises or guarantee particular results. Your creditors are under no obligation to settle with you and it is unethical to lead you to believe otherwise. Therefore, nothing is a sure thing. There are options, probabilities, risks and benefits. A knowledgeable lawyer will discuss your options, risks, and benefits with you.
So what is a reasonable debt settlement fee?
Companies or lawyers who charge a contingency or percentage of the reduction in the amount of debt are preferable to those who demand payment up front.
First, they do not take money from you up front. Odds are, you are already in financial trouble. Why pay a lawyer or company when they have not done anything for you yet? Second, payment for performance suggests the attorney or debt settlement company has confidence in their ability to achieve a favorable result for you and are willing to prove it to you without taking your money first.
Why should I choose a lawyer?
Knowledgeable debt settlement lawyers are familiar with state and federal debt collection laws, consumer protection statutes, and bankruptcy laws. They can offer you more services and present you with options that non-lawyers cannot, or may be unaware.
For instance, a knowledgeable debt settlement lawyer can help you recover damages against your creditors or debt collectors if they engage in unfair or abusive collection practices that violate the Federal Debt Collection Practices Act (FDCPA) or the Telephone Consumer Protection Act (TCPA). The FDCPA and the TCPA are powerful federal statutes that are intended to curb creditor harassment, and other abusive or unfiar debt collection practices. A knowledgeable lawyer may be able to help you eliminate the amount you owe altogether, reduce your balance, or even recover damages against an abusive creditor or debt collector.
Another benefit to working with a debt settlement lawyer arises when you are considering bankruptcy or if bankruptcy is an option for you. If you are considering a debt settlement, and your lawyer happens to be a knowledgeable bankruptcy attorney, the threat of bankruptcy alone can be enough to help you achieve a favorabe debt settlement.
Another benefit to working with a debt settlement lawyer is that collection telephone calls and collection letters will be directed to your lawyer instead of to you or your family members.
How do I find a knowledgeable debt settlement lawyer?
Knowledgeable debt settlement attorneys are often recommended by others through referral (word of mouth). Reputable debt settlement attorneys do not market their services with "bait and switch" advertisements or tacky, "too good to be true" advertisements. As the old adage goes, "If it seems to good to be true, it probably is."
You should do your own research on the internet using search engines or ask others who have had positive experiences with their lawyers to recommend a lawyer to you. You should search for a debt settlement attorney in your geographic area who has relevant experience, and is reputable in the legal community.
You can also check internet sources such as Google, Avvo, or the attorneys' website to verify his or her credentials.
If you really want to investigate an attorney's reputation or skill, check whether that attorney has litigated cases in court or taken cases to trial. There are many ways to do this. You can check the Public Access to Court Electronic Records (PACER) at www.pacer.gov, commercial websites like www.legaldockets.com, or perform Google searches.
Although we are located in Michigan, we help people achieve debt settlements across the country. If you or someone you know has any questions about debt settlements, or needs help with a debt settlement or collections issues, we invite you to contact our office at (313) 415-5559 or email us at firstname.lastname@example.org.