Debt Settlement Lawyers
If credit card debt has you feeling anxious about your financial future, even to the point of considering debt settlement and lawyers - don't despair. In these tough times, many Americans share your dilemma, and are actively seeking ways to reduce or eliminate their unsecured debts. One option that many consumers opt for is debt settlement, a process whereby credit card companies may agree to "settle" your debt for a reduced amount of what you owe. Under this plan, debt settlement specialists will generally work with you to help settle your debt, eventually negotiating with creditors on your behalf.
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Debt settlement companies typically advise their clients to stop paying their credit card statements and instead, set aside the money to be used to accumulate a lump sum settlement offer to credit card companies. While debt settlement has become a popular form of debt relief for consumers, it is important to note that debt settlement will normally have a negative impact on your credit, and creditors may send threatening letters to cardholders and even take legal action in an attempt to collect the full amount owed.
Despite this, many consumers have made debt settlement a popular debt relief option because they truly are faced with difficult financial circumstances and want to pay whatever reduced amount they can work out with creditors, rather than declare personal bankruptcy -- which will typically impact their credit for an even longer period of time -- up to 10 years.
Why Credit Card Companies Settle
Why are credit card companies often willing to settle with consumers for much less than the full amount owed? For a very logical, bottom-line reason: If credit card companies decide to "sell off" what is considered to be "bad debt" to a third-party debt collector because they have decided it is unlikely they will be able to collect from you, they will often receive as little as 10 cents on the dollar. It's not surprising, then, that if credit card companies receive a fair and reasonable offer to settle from you, or made on your behalf by a debt negotiator, they may agree to settle your debt for much less than you currently owe. How much debt settlement could possibly save you depends on your financial situation, how much credit card debt you have, and the forgiveness policies of the credit card companies involved.
Debt Management or Debt Consolidation
Debt settlement is sometimes confused with other debt-relief services such as a debt management program (DMP) aka debt consolidation. Under a debt management program, your unsecured debts will typically be consolidated into one monthly payment that you make to a credit counseling agency. Acting on your behalf, that credit counseling agency will then distribute your monthly payment to various creditors based on the repayment plan that they have negotiated with your creditors. Typically, this monthly payment could be considerably lower than what you are currently paying, because the proposals made to creditors on your behalf normally would involve lower interest rates and possibly the waiving of fees and penalties that may be on your account.
As you stop using your credit cards, and interest rates are reduced, more of the money you pay each month can go towards actually reducing the principal amount of debt you owe -- instead of simply paying interest and getting nowhere in terms of retiring your debt. For many people on the debt treadmill, paying the minimum amount month after month just to cover the interest, debt management offers a proven and honorable way to reduce or eliminate debt, and regain control of their finances and their future.
Debt Consolidation Loans -- A Word of Caution
Another possible debt relief solution is a debt consolidation loan, which could allow you to combine all of your high interest rate debts into one lower interest rate loan. One word of caution regarding a debt consolidation loan: While in theory debt consolidation loans are a proven and workable solution to get out of debt and save money, often people who take out debt consolidation loans ending up running up high credit card debts all over again. Now, they have high interest credit cards to pay off AND a debt consolidation loan. In addition, if they used their home to secure the loan, they have now put their home at risk if they default on the terms of their loan. So, in this case, they have "traded" unsecured debt which is not secured by collateral, for secured debt, which is secured by their home or other asset.
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Debt Relief and Lawyers
If you decide to work with debt management lawyers, keep in mind that there are many debt relief organizations and credit counseling agencies that also may be able to help you. The same argument also holds when you're considering the services of a debt consolidation lawyer; unless they are licensed in your state, they cannot represent you in court in the event a creditor sues you. So before you approach an attorney to give you legal advice on either debt management or debt consolidation, make sure that you know all the terms involved - particularly their fees and services. /p>
With so many debt-relief options available today, some people may seek the services of bankruptcy lawyers to handle their bankruptcy cases. Declaring personal bankruptcy - whether its Chapter 13 or Chapter 7 - is often considered the debt relief option of last resort. But bankruptcy may be helpful if you have a tremendous amount of debt because it can, in some cases, help you eliminate your debt and give you a fresh start towards rebuilding your credit.
If you are considering working with debt settlement lawyers or a debt negotiation attorney, be aware that there are some who may overcharge you for services that, in some cases, are never rendered. In the past, some debt settlement companies charged their clients initial fees before they even begin to settle your debt. But the Federal Trade Commission developed new regulations that now require debt settlement companies to make specific disclosures to potential clients -- such as how long it will take to settle their debts, what their service fees are, and the potential negative consequences that could result from debt settlement.
While the ruling is designed to protect consumers against deceptive debt relief or debt negotiation services, unfortunately, some of these companies simply morphed into debt settlement law firms in order to be exempt from these new regulations. When this happens, consumers who choose to work with a debt settlement lawyer may be charged upfront fees that cannot legally be charged by a non-attorney based debt settlement company.
Understand All Your Debt Relief Options
The bottom line: Many debt settlement companies have been able to help consumers settle credit card debts for less than is actually owed. However, before you enroll in any debt settlement program, make sure you understand how much you are likely to save, how long it will likely take you to settle your debt by accumulating a lump-sum amount that you can pay to creditors, and how your credit could be impacted. Also understand the legal risks associated with settlement.
Finally, any amount of money you save through a debt settlement may be subject to federal taxes. With all the warnings and negatives associated with debt settlement, why are consumers still choosing it? Because, bankruptcy laws make it harder and harder to qualify for straight bankruptcy and individuals going through tough times need to find a way to get off the in-debt-for-life treadmill.
Regardless of which debt relief service you may choose, we have provided this information to assist you in making an informed decision on how you might reduce or eliminate your credit cards and other unsecured debts.
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