Suppose you are struggling to pay your debts. You may question whether you should hire a debt defense attorney or a debt settlement company to assist you in negotiating with the credit card company, debt collection attorney, or debt collector.
In almost all cases, it is best to avoid debt settlement companies.
Generally speaking, debt settlement means that a creditor has agreed to accept less than the amount you owe as full payment.
How Debt Settlement Companies Work
Debt settlement companies claim that they can negotiate with your creditors to settle your debts for pennies on the dollar.
If you are current on your credit card payments, they will tell you that the creditors will not negotiate the debt unless you stop making payments.
The settlement company will then tell the consumer to make these payments to them directly while they negotiate with the credit card company or debt collector.
These payments will go towards the debt settlement company’s monthly service fee, and the remainder will be set aside for future settlements of your debts.
The debt settlement company will only contact your creditors after you have enough—based on the company’s opinion—and offer each one a lump sum that is less than what you owe.
Why Settlement Companies Are Not the Best Solution
While debt settlement companies can certainly help you work out a payment plan with your creditors, they can also hurt you.
The main problem with debt settlement companies is that they often charge for their services upfront.
Here are the main downsides to using a debt settlement company:
Downside #1: Your Debt Continues to Increase
The debt relief company might not mention that the total amount you owe will increase once you stop making your payments, which will increase due to various added fees and interest charges.
Downside #2: The Credit Card Company or Debt Collector May Not Settle
The debt settlement company probably won’t tell you that your creditors don’t have to accept a lesser amount than it is owed to satisfy the debt or that many creditors will not agree to a settlement, if you are working with a debt settlement company.
Downside #3: Debt Settlement Fees Are Typically High
Going through a debt settlement company can be costly. These companies often charge a set-up fee, a monthly fee, and a percentage of each settled debt (say, 25%), and they might pay themselves before paying any of your creditors. Or, a debt relief company might disappear with your money.
Why are Debt Defense Lawyers better than Debt Settlement Companies?
Debt settlement lawyer has negotiation skills developed over years of experience dealing with creditors and extensive knowledge about debt collection laws.
A debt settlement attorney will discuss your options with you and decide if you should attempt to settle your debts or do something else, such as fighting the debt or filing for bankruptcy.
A debt defense attorney can represent you in court if you get sued by a credit card company or debt collector.
And, if a debt collector violates any consumer protection law, the consumer protection attorney can assert any claim you may have against the creditor.
Debt relief attorney services and debt settlement company services are both widely available in Georgia. However, an Atlanta debt relief attorney has a broad range of legal tools at their disposal.
Diwan Law works hard to provide positive results for its clients dealing with debt collection issues.
If you are dealing with debt collection issues, you need an experienced collection lawyer. Contact Diwan Law today at 404-635-6883.