The big difference between hiring a lawyer and hiring a debt settlement firm to resolve financial problems is unparalleled. Many consumers who choose to hire settlement companies to resolve their debt issues are taking a big risk.
In fact, The Consumer Federation of America recently shared an article stating how these companies are causing consumers more harm than good, and consumers are “playing the lottery” when dealing with these types of firms. Whether your located in Pennsylvania or another state, it’s become a national problem. You can read more here.
This article is meant to help you to make an informed decision with regards to how you should proceed with hiring someone to help you settle your debt problems.
What Exactly Do Settlement Agencies Do Anyway?
They claim to negotiate your debt with the lender allowing you to pay back less than you actually owe.
However, while in some cases they may actually achieve minimal results with a handful of creditors; the Consumer Federation maintains that any remaining balance will skyrocket due to those same creditors increasing their fees and interest rates. So essentially, they don’t really save you much at all, even with the small amount of creditors that actually agree to the arrangements.
Unfortunately, for many consumers, hearing phrases such as “we’ll settle with your creditors for much less” or “pay off a small portion of what you actually owe” is enough to get sucked into elaborate scams. What many people fail to realize is that these agencies not only charge astronomical fees for their questionable services, but the creditors rarely agree to the terms. Plus, the consumer isn’t always told that the creditor never accepted the conditions in the first place.
So, the consumer’s going about their daily business thinking that all is taken care of, when in reality, its really not.
It goes back to that old saying, “if it sounds too good to be true, then it usually is.” Unless, you’ve filed for bankruptcy with an attorney, then the chances of a creditor agreeing to reduce or eliminate your debt, are slim to none.
The Dangers Associated with Using These Types of Agencies
I’ve had many clients over the years who signed on with these types of companies, only to later find themselves in an even bigger mess than they initially started with. If you’re batting around the idea of whether to hire an attorney or sign up with a debt settlement agency, please take a minute and carefully read through the following before making your decision:
- Many of these companies insist that you place money into an escrow account specifically set up for your monthly bills, plus, they pay themselves first.
- It could be as long as three or more years before they ever even attempt to settle your debt.
- Many consumers end up canceling the program, because they can’t meet the agency’s payment plan requirements.
- It’s not at all uncommon for these types of firms to recommend that you quit paying on your debts, period. But, this can be a very bad idea since your personal debts will not be discharged (forgiven). The only legal way for your debts to be discharged is through bankruptcy.
- Many make false guarantees for eliminating debt. They draw the consumer in by advertising or proclaiming that a “new government program” will eliminate all your debt. Not so.
Why an Attorney Is a Safer Option than Using a Debt Settlement Firm
- Unlike debt arrangement services, in the case of an attorney, the fees will be explained under the supervision of the courts.
- After reviewing your case, an attorney will first discuss whether chapter 7 or chapter 13 would best fit your situation, then file your case accordingly.
- Once your case has been filed, the law prohibits creditors from contacting you either by phone or mail (automatic stay).
- A good lawyer is often less expensive than the settlement firm.
- I like to keep my client’s in the loop as to what’s going on with their case until actually discharged. We talk by phone, email and letter.
It’s definitely in your best interest to talk with an attorney before jumping into something that could later cause you more headaches than you already have.