Debt Settlement Companies

Nowadays, there are debt settlement companies claiming that they will be able to help you settle your outstanding debt. However, one should be very careful, as there are many debt settlement scams. Although it is not necessary to hire an attorney, I would only recommend a debt settlement company if it is a law firm or if the company has an in-house attorney.

This has many advantages and disadvantages, which I will go over later in this post.
If you decided that you can not afford to pay off your debt, and would like to negotiate a settlement, hiring a third party may be beneficial to you. When going in for a consultation, I would recommend that you take a look at previous settlements they have achieved. If they are unwilling or unable to show some of the work they have done, I would stay away. Also, be very wary if they can guarantee an offer. They may be able to let you know what is typical, however there is no way that they can guarantee any amount. Last but not least, they should ask where or how you will be obtaining the funds to settle the account. If not, they are probably there just to take your money. At the law firm that I work at, we always check to see if the client would be able to afford settling the accounts. If not, they are wasting their time and money as they would not be able to settle.

One of the advantages of hiring a third party company or law firm is that you do not have to deal with the collectors. I know first hand how much of a jerk they can be. This may not seem like a big issue, but when you are receiving 30 plus calls a day, it can become very stressful. If you hire an attorney to do the settling for you, the collection agencies can no longer legally contact you, they must contact the attorney (for consumer debts). However, the original creditor may still contact you. Unfortunately, this not apply to business debts. The collection agengies may contact you if your debt was primarily used for business expenses. On a side note, if you live in California, you are protected even more and not even the original creditors may contact you. Other states may have similar laws, but I am unfamiliar with other states. If for some reason, the collection agency contacts you after being made aware of your attorney, you may sue them for violating FDCPA (Federal Debt Collection Practices Act) laws. It will be $1000 per offence and they will need to pay your attorney's fees.

Another advantage of hiring someone to settle your debt, is they may have contacts with the collection agencies. Many build a relationship with employees at certain collection agencies and are able to get great deals for you. Even if they do not have a contact at particular collection agency, they have the experience and know how to negotiate with the collectors.

Finally, if you happened to get sued over your debt, an attorney will be there to assist you with all of the pre-trial paper work ( answer, discoveries, cmc statement, etc) and even a trial if the lawsuit goes that far.

On the other hand there are downsides to hiring someone else to do the negotiating for you. Most people fell behind on their payments because they could no longer afford to pay their bills. Paying someone to settle your debts just adds an additional cost. From my experience, most people should be able to settle their own debts for about 50-70% off, depending on how good of a negotiator you are.

Another disadvatange is that your debt is just one of many accounts that the company has to work on. If you were working on it yourself, you should be on top of all the negotiating and will know exactly what is going on. Many debt settlment companies may leave you in the dark as far as the progress of the settlement. Also, there is the small chance that they are so busy that your accounts are not negotiated on for a long time.

I would say that if your debt is relatively small, less than $10,000, you should seriously consider negotiating the debt yourself.

Ultimately, is your decision to use a debt settlement company or not. Before deciding, I would recommend taking a look at how much time you can commit to negotiating, how good your negotiating skills are, and how much it would cost to hire someone.