You may have heard or read about debt settlement. Maybe not?
So what is this mysterious term and what does it mean? Ok, it’s not that complicated and some would say self explanatory. Pay off your debt. Right? Not so fast my friends. Debt settlement claims to settle debt and potentially can, but the players, companies, and tactics by which it is achieved are often QUESTIONABLE, to say the least.
As a licensed and practicing attorney in Florida, New York, and New Jersey, and with a strong focus on consumer debt relief, I see more and more clients who have either ever signed up for a so-called debt settlement program or already they had paid exorbitant amounts of money to said companies and their debt was NOT paid. Also, many of these professionals fail to inform the client that there are IRS TAX CONSEQUENCES when a debt is discharged or discharged (over a certain dollar amount) and worst of all, “specialty” debt settlement companies they are often charging a lot of money. in front of the debtor, before doing any work, which is often against the FTC and state law. The worst violation I have come across so far is companies that promise to eliminate all unsecured debt (credit cards, medical bills) and fail to inform the customer that the procedure is merely a negotiation and not legal, that the creditor and the credit company card companies and/or debt collection agencies are under no obligation to talk to your settlement company, let alone settle the debt for less than what is owed, and yet many (not all) of these underground companies hire thousands of unpretentious workers. everyday Americans on a daily basis.
I’m not sure of the merits of debt settlement. On the one hand, the credit of the debtors is already shot at that point and two, the negotiation can be achieved and handled by the debtors themselves without having to pay money to get rid of the debt (counterproductive in many ways). It’s not as if the liquidation company has formal experience (perhaps earlier since sellers are the exception) or needs to follow a formal template or system. The TRUE, LEGAL, REAL debt relief solution is working through a licensed consumer debt relief attorney.
With an experienced attorney, one has the ability to see their financial difficulties and debts fully and holistically and not just in a bubble or vacuum of credit card debt. One is able to address and address the CAUSE and not the symptom and see and potentially address ALL DEBT, both secured and unsecured, including credit cards, medical bills, tax liens, and home dents and foreclosures, if applicable. This allows for a plan of action that is comprehensive and does not give the debtor temporary relief or a false sense of security or little good news while ignoring the 800 pound gorilla sitting right next to them! Perhaps the debts are so outrageous that the client is better prepared for bankruptcy. Furthermore, even if the debt is solely credit card debt and the client is unwilling or unable to qualify for bankruptcy, an attorney can achieve the same settlement, if not with better and more effective results, at a much lower cost than the of a debt agreement. business.
Bold statements? Nope!
Empirical data shows that the “fees” of the settlement companies, including processing and monthly payment, are so high and unfair that, in most cases, they have put the debtor in a deeper financial hole. A lawyer should give a retainer agreement and a plain English layout up front of what he is doing for the client and how much it will cost. A good lawyer will not even accept money or start a case if he sees that the client’s wishes are not legally possible. In addition, a credible attorney will NEVER make promises or guarantees of success, much less promise total elimination or settlement, or throw out numbers like settlement companies promise at least 50-80% reduction in principal. There is also the all too common problem of multiple debtors and credit cards and the company’s inability to get ALL creditors to settle and worse, the settlement company’s failure to contact the creditor real and real to make sure they are the parties “dealing” with the true debt holder and not a third party collection agency not authorized to issue settlements! What about credit card companies and smart banks that issue an agreement subject to the reservation of the right of a deficiency judgment? In Spanish… we will allow you to pay the balance and reduce it by 25%, but we still reserve the legal right to sue you and claim the 25% at a later time. Often these judgments can stay in place for 20 years and lead to wage garnishments, liens, and writs of possession. An attorney will ensure that such an agreement RELEASE the client from any future deficiency judgments. The most important thing is that the lawyer has a great trump card and a bargaining chip. Credit card companies know that the attorney can legally and ENTIRELY eliminate their client’s debt by assisting their client with bankruptcy or LITIGATION AND SUEING THE CREDIT CARD COMPANY, BANK AND COLLECTION AGENCIES. Sue, litigate you say? How, why, what? Questions and answers…
There are a lot of different federal and state laws that govern lenders and specifically credit card issuers, for example, to list the most common:
* The Truth in Lending Act (TILA)
* Unfair and Deceptive Acts and Practices of the State (UDAP)
* The Fair Credit Reporting Act (FCRA)
* The Fair Credit Billing Act (FCBA)
Dozens of additional statutes and laws designed to PROTECT THE CONSUMER and govern credit card companies! A slip in any of these laws and a competent attorney can litigate and sue the credit card company for such a violation or, for example, for not providing the customer with the necessary notices of increases in their APR (annual percentage rate), or due to unexplained delay. charges, or for sending statements and bills late. The list goes on.
Therefore, in my opinion, DEBT LITIGATION is a FAR SUPERIOR and more successful methodology for addressing credit card debt compared to signing with an unknown debt settlement company, especially when creditors aren’t even there. willing to bend. You get the best of ALL worlds and solutions with a consumer defense attorney. He or she goes into battle with countless armor and weapons ready to fight debt at its root. The client has an experienced and effective attorney by their side and the attorney is equipped and empowered to contest ALL of the client’s debts, even if it means litigation, if necessary as mentioned above (sometimes even winning money for the client). in restitution). Furthermore, by hiring an attorney to handle their debt, the client is not “missing” their opportunity to settle the debt, as the attorney can and, if appropriate and more efficient, often will negotiate, as long as they bring the same or better results and that all legalities and ramifications are addressed, such as non-deficiency judgments and explanation of IRS tax consequences. Finally, an attorney can, and often will, drop the last bomb and just painlessly and effectively end it all by filing for bankruptcy on behalf of the client, if and when appropriate. (For another conversation on when bankruptcy should be explored and employed.)
In short, you are being bombarded on TV and RADIO about “magical” debt elimination programs or hearing and reading about debt settlement. BEWARE, there are many unscrupulous people and companies praying for the desperate and in debt, often making false promises and taking much of your hard earned money and doing no work.
Are there legitimate settlement companies and players? Absolutely! No “ifs” or “buts”. Just like not all lawyers or doctors are trustworthy and honest. I am not judging the industry, but I am here to educate the uninformed or curious about the process, the players, the pros, cons, and alternatives.
Whichever way you look at it, debt is an ugly game and the quicker and cheaper it is to get out of it, the better. Make sure that the methods used and the players involved in them are legal and that you are not digging a deeper hole for yourself. Make your decisions based on facts and laws and not on emotions, out of sheer desperation, or based on cunning and misleading advertising. Know your rights and remember that while debt is stressful, there are several laws to 1) protect you and 2) provide remedies and even possible restitution.
Consult an attorney who knows how to use these laws and who will protect you. Any reasonable law firm should offer a full free consultation.
Good luck!