August 22, 2016

Debt Attorney vs. Hiring a Debt Consolidation Company

I’ve lost my job, or had a serious medical issue or maybe just have unhealthy spending habits and now find myself bogged down in debt.  How can I safely consolidate my credit card debt and start to correct my financial situation?   When deciding how to resolve your credit card debt you have many options: you can try and resolve the situation yourself, hire a debt attorney or hire a debt consolidation company.

While it may be tempting to try and save money by representing yourself it is probably not the best option.  If you choose to try and improve your situation on your own you are working at an immediate disadvantage.  You don’t have experience working with creditors and you don’t have the legal knowledge to hold creditors accountable to the law.  Your creditors make their living off of collecting debt.  They are experts at what they do.  You, fighting your case alone, won’t have the same amount of time or resources to devote to negotiating your debt.  You are working at a deficit not knowing what options and tools are available to you and how to best leverage your situation.  You also will be forced to deal with the daily stress of a tough financial situation and persistent collection efforts.

Hiring a Debt Attorney

Hiring a debt attorney can help you in a number of ways including relieving the daily stress of your situation.  Once you hire a debt attorney he or she becomes the point of contact for your creditors.  All phone calls and letters will be sent directly to your attorney and your creditors are not allowed to contact you.  Your lawyer / law firm are experts in debt consolidation and negotiating with creditors.  They deal with creditors on a regular basis and have legal expertise in the field of debt.  Your debt attorney can ensure that your creditors are working within the law and hold them accountable for any illegal collection efforts.  Your debt attorney will also ensure city, state and federal statutes are being followed in regards to the amount of fees and penalties that are allowable by law.  Your lawyer can also review your financial situation and advise you on all of your options including debt consolidation, directly negotiating with individual creditors, pursuing a home equity line of credit and possible bankruptcy.  Each option has direct consequences that impact your financial health and credit score.  Hiring a debt attorney can work in your favor as he or she can assess which of these options has the best potential for success and assist you in implementing your chosen plan.

When you are hiring a debt attorney, fees are discussed and disclosed at your initial appointment.  Debt consolidation companies are for profit companies that make their money any number of ways.  Some companies will charge you an upfront fee and administration fees.  These companies may also take a portion of each payment you make towards your outstanding debt.  A consolidation company may advise you to stop making your credit card payments.  Once you stop making payments the debt consolidation company will contact the creditor to negotiate on your behalf and then use the money you have deposited to make your payments.  Regardless of working with a consolidation company, if you stop making payments you can be subject to late fees and penalties that will negatively impact your credit score and increase the total debt you owe.  The quality of debt attorneys and debt consolidation companies can vary dramatically.  When looking at hiring a debt attorney you will want to interview potential attorneys and review their experience and reviews.  You will also need to do your research with debt settlement companies.  Scams are rampant in the debt settlement industry.  Desperate consumers are promised a discount or decreased debt amount that a company cannot deliver or the consumer is charged such high fees he or she is in an even worse financial position.  Because of the widespread poor practices the Federal Trade Commission enacted a series of rules: “Before you have to pay any money, the rules require debt relief service companies to disclose:

  • how long will be needed to get the claimed results
  • if the service includes a settlement offer, the date by which the company will make a settlement offer to any of your creditors, and the time by which it will make an offer to all of them
  • the amount of money or percentage of each debt you will have to have accumulated before the company will make an offer
  • if the service depends on you not timely paying creditors, the likely negative effect on your credit rating, the fact that you may be sued by creditors or debt collectors, and that the amount you may owe may increase because of interest and fees, and
  • your right to cancel the contract for services and receive a refund within seven days of any money (not owed for services already provided) held in an account.”

These new rules prohibit debt consolidation companies from collecting fees until they have obtained an agreement to reduce at least one debt and you have made at least one payment on that agreement. The rules also place guidelines on fee amounts. Even with these new policies in place it is important to ensure you are working with a reputable and competent business.  Debt consolidation companies have restrictions regarding your spending and credit.  You will typically sign an agreement stating that you will not open any new credit accounts and you will not be able to put charges on your existing accounts.  Debt consolidation companies do not have the same legal expertise as debt attorneys and they do not have the right to practice law.

Whether you decide to pursue hiring a debt attorney or a debt consolidation company it is important that you do not delay.  Get help to find the best option for your financial situation now.  The longer you wait, the worse your financial difficulties can become.  A debt attorney can review your financial situation and help you safely consolidate your credit card debt.  If you are in financial difficulties and struggling with credit card debt, please give us a call at (855)-976-5777..

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