Monday, November 28, 2011

Sound Advice for Settling Debt Using a Debt Settlement Attorney

Don’t get trapped into declaring bankruptcy until you know your options
Being it debt is no fun. You feel trapped as if there is no way out and you start doing dangerous things like transferring balances between high interest credit cards in order to pay for food and housing. Or worse—you decide that declaring bankruptcy is your only option. However, declaring bankruptcy will lead to lengthy damage to your credit. Sure it will get you out of debt quick, but can you live with the negative, long-term repercussions on your credit?
Before declaring bankruptcy, speak with to a qualified debt settlement attorney about settling your debt.

How does debt settlement work?

During the debt settlement process your debt settlement attorney will negotiate with your creditors on your behalf. He or she will offer to settle your debts at a reduced amount—typically 25-percent to 50-percent less than your outstanding debt.
Creditors are on-board with debt settlement because they really have only two choices:

1. They can collect whatever you can give them.

2. Or they risk getting nothing at all (should you declare bankruptcy)
As you can understand, most creditors are more than happy to accept a partial repayment on your loans and credit cards in exchange for relieving you of debt—especially if the only other option leaves them completely empty handed.

How do you qualify for debt settlement?

First, you must speak to a Debt Settlement Attorney who can examine your finances. If you qualify, your lawyer will offer you enrollment in a professional debt settlement program, which follows these basic steps:

1. Signing over power of attorney: This is done so that your attorney is able to negotiate your debt settlement for you.

2. Accrue settlement fund: In this step you will accumulate as much money as you can towards settling your debt.

3. Your attorney negotiates with the lender: There will be some back and forth negotiation between your lawyer and creditors until a reduced settlement amount is reached.

4. Debt is paid: Using the funds accumulated in debt settlement fund.

5. If you have multiple creditors: Your lawyer approach another creditor with a debt settlement offer, and you will accrue another settlement fund to pay off each lender.

The pros of using a debt settlement lawyer-

1. Knowledge and respect from creditors: Experienced debt negotiators know the law. For instance, they are aware of the Fair Debt Collection Practices Act, a federal law that governs how, when and where a debt collector can contact you—e.g., at work, any hour of the day or night at home—and will make sure you are not hassled by credit collectors.

2. Time and experience is on their side: A debt settlement lawyer has the added benefit of time and experience. Ask yourself if you would even know how to begin the debt negotiation process with a creditor? Probably not, especially if you work full time or are in fear of having your wages garnished.

3. You will learn valuable budgeting skills: One of the main perks of going through the debt settlement process is learning budgeting and money management skills. Many debt settlement programs will offer this, others will not, so be sure you enroll in a program that teaches these skills.

The cons of using a debt settlement lawyer-

1. Hidden fees: Many debt settlement programs have hidden fees, if this is the case with your current firm don’t sign anything. Instead, seek out another lawyer to represent you.

2. Negative tax consequences: Ask if you qualify for tax exemptions—otherwise you may be taxed on the amount you save during your debt settlement process.

3. Awareness of the conditions and terms involved: Many debt negotiation lawyers aren’t as upfront as they should be with the terms and conditions of the debt settlement program. Ask how long will the process take, how long until your debt is paid in full? And don’t sign anything until your questions are answered.


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