Wipe Out Debt

WARNING: Beware of Debt Negotiation Firms

Debt Settlement: Can I Settle My Debt in CA?
Edited by Tony Thompson

Falling behind on your payments is a frightening thing. Do you face foreclosure or repossession? A lawsuit? Wage garnishment? It doesn’t have to go that far. Long before you have to worry about losing your property or going to court, you have options for getting that debt back on track.

Repossession, foreclosure, and other collection actions are time-consuming and expensive for your lender. They make more money with less hassle when you continue to make your regular payments. For that reason, your lender may be willing to give you a grace period or work with you to make payments a little easier. You may be able to settle for a lump sum of less than you owe, you maybe able to get a better interest rate, or you may get forgiveness for a missed payment.

Debt Negotiation Firms

You’ve probably seen ads for debt settlement companies that offer drastically reduced lump-sum payments and safety from lawsuits. They may even promise that they can remove negative information from your credit report. Unfortunately, they rarely live up to those promises. Generally, a debt negotiation firm will advise you to stop making payments on your unsecured debts altogether. In theory, you’d use the cash you save by stopping payments as a “war chest” to offer as a settlement. The debt negotiation company will deal with your creditors on your behalf to get them to accept whatever you can offer as a settlement.

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In reality, your creditors have no obligation to negotiate with you or anyone else. You’re begging for a lawsuit if you completely stop payments. Partial payments are better than no payments at all and your creditor has the right to sue when you default – no debt negotiation company can change that. To make matters worse, you’ll have to pay a hefty upfront fee and, in many cases, large monthly payments to the debt negotiation company. In addition, there may be tax ramifications to settlement that most of these firms never disclose.

So where does this leave you? Behind on your payments, short of cash because you had to pay the debt negotiation company, and still facing a lawsuit.

How can an attorney help?

Dealing with lenders isn’t easy. They have teams of analysts and attorneys working for them to make sure they get the best deal possible. Of course, the best deal for them isn’t necessarily the best deal for you. An experienced attorney will make sure that you get the most out of debt negotiation. Your attorney knows all of your options and knows what the lenders are likely to give up.

You can always reach out to your lender on your own and try to reach an agreement. Just remember that you’re facing an experienced team that deals with thousands of cases like yours every week. You don’t want to go through the hassle of negotiating terms for your debt only to end up behind and facing collection action again. You want the help of an expert who knows you and your unique situation.

Reference:
borowitzclark.com

About the author

Tony Thompson

Tony Thompson is a partner in the law firm of Thompson Law in Los Angeles, California. He has more than 20 years of legal experience in bankruptcy and tax resolution.