A debt settlement attorney specializes in negotiating with creditors to reduce a loan’s payoff amount. For borrowers who have accumulated a seemingly impossible amount of debt but wish to avoid bankruptcy, debt settlement attorneys act as advocates on their behalf, discussing other alternatives with creditors. This type of negotiation is usually undertaken where credit has been given without collateral, such as a credit card balance. Experienced attorneys can often negotiate a settlement that both greatly reduces the amount owed as well as limits the negative effects such a settlement can have on future borrowing.
In most cases, a debt settlement lawyer is hired when accounts have already been turned over to a collection agency. When an account is sold to a collection agency or settled, it is noted on a credit report by the initial creditor as a “charge off.” A charge off is a huge negative in determining a credit score, and should be avoided if possible. For this reason, debt settlement is not recommended prior to a charge off unless the attorney for debt settlement is convinced of his ability to keep the charge off from being added to a credit statement.
One of the first things that most debt settlement lawyers will do is clean up an existing credit report. Any line on a report that is found to be in error can be removed, offering an immediate bump to a credit score. They file the documentation through the appropriate channels, and make sure that any negotiations are entered into with the most accurate information. They will also contact all lenders to inform them of the client’s interest in pursuing a settlement and request that all late fees and additional penalties be stopped until an agreement is reached.
Creditors are typically amenable to dealing with a debt settlement lawyer because it means that at least some of the money borrowed will be recouped. In order to avoid losing everything through a borrower declaring bankruptcy, a debt settlement can usually be reached that requires the debtor to pay only a fraction of what is owed. Each credit card requires its own settlement, and the terms of the agreement will vary based on the company that holds the loan.
As debt settlement lawyers will advise, a settlement will remain on a credit report for many years to come, and the notation is added both when the account is initially sent to a collection agency and again when the settlement is paid. Experienced lawyers are often able to come to an agreement wherein this payment of the settlement is not recorded, allowing a quicker recovery for a client’s credit report.
Debt settlement attorneys typically provide legal, not financial advice. It is important to reach out to a financial counselor as well to change the fiscal behavior that lead to this position. In that way, you can continue to build upon the solid foundations laid by a debt settlement attorney.
Comments on this entry are closed.