Debt Settlement Overview
Debt settlement is an arrangement reached between a lender and a borrower in which the borrower agrees to pay off a large, one-time payment toward an existing balance in exchange for forgiveness of the remaining debt minus the penalties. For instance, when a person owes $10,000 on a single credit card, he or she may approach the credit card company and offer to pay $5,000 instead of proposing a too-good-to-be-true arrangement, but it is not.
As might be expected, lenders are wary of advertising debt settlement, and while there are no reliable statistics on success rates, the Federal Trade Commission (FTC) estimates that around half of debt settlement cases are successful. However, if you’re badly behind on your payments and on the verge of filing for bankruptcy, your lender may be ready to accept whatever you can offer in exchange for giving you one more chance to get back on track.
Is It Better to Negotiate By Yourself?
The next stage is to decide whether or not debt settlement is the best course of action for you so you can become debt-free. You can do it yourself or hire a debt settlement lawyer. These are stressful times, so you would want some free credit counseling. Please keep in mind that your creditor must assist you and that a lawyer may not be able to negotiate better terms for you than you can on your own. Aside from that, the debt settlement sector contains its fair share of con artists, ripoffs, and frauds, which is why many people choose to wing it by themselves first.
Defending Against Debt Collection
When you come to Robert Russell Law Office, we thoroughly examine your situation to determine whether debt settlement or collection defense is a viable choice for you. Our reliable attorneys with vast experience in debt settlement can help you in negotiating for a viable payment arrangement that works to your advantage or build up a defense against collectors so that your journey towards financial freedom goes without a hitch.
“Debt settlement” means that we help you reach an agreement with creditors for them to accept less than the total amount due. This can either take the form of:
- A one-time lump-sum payment to your creditors. Like in the example above, giving them $5,000 within 30 days of the agreement to get rid of a $10,000 debt; or
- Payment arrangements where there is a reduction in the account interest rate, the monthly payment, and/or the total amount to be paid.
“Collection Defense” means that, as part of the debt settlement process, we look for all defenses you might have to pay for the debt. For example:
- Your creditor may have waited too long to try and collect on the debt, which means the statute of limitations has run out; or
- You did borrow money from someone, but the person calling you is different and they cannot prove they have the right to collect on the original creditor’s debt. In this case, the debt collectors don’t have the standing to collect from you.
We use both of these approaches to determine if we can help you resolve a creditor’s collection effort so you can avoid filing bankruptcy.
The Advantages and Disadvantages of Debt Settlement
Many debt settlement companies strive to take advantage of debtors by charging excessive fees and hidden expenditures, which may include setup and monthly account fees, amongst other things. In addition, it is vital to understand that some types of debts, such as mortgage arrears, are often ineligible for debt settlement programs.
With that said, debt settlement can be quite helpful if done correctly. Some of the advantages of debt settlement are as follows:
- You may be able to pay back a portion of your debt rather than the entire amount you owe.
- During the procedure, you are not required to make any ongoing payments.
- If you are unable to pay back the entire amount you owe, you may be able to get debt relief.
Debt settlement, on the other hand, should be considered a last option due to the numerous ramifications it has. These are some examples:
- Your credit score will suffer as a result (could be up to seven years)
- You may still be liable for late fees and other charges.
- It’s possible that you still owe taxes on your loans.
- The procedure can be time-consuming, with certain parts requiring years to finish.