The COVID-19 pandemic has had a devastating effect on many working people’s finances. A recent survey by Bankrate found 42% of Americans have seen their debt rise since the pandemic began, and over 50% of these people have been in credit card debt for over a year.
Bankruptcy looms. For those with few assets and a massive amount of debt, bankruptcy can indeed be the right option, but for those with properties or a higher income, bankruptcy can be significantly more expensive than debt settlement.
Debt settlement is a negotiation with your lenders to reduce the amount you owe so it’s easier for you to repay. At the very least, debt settlement will outline more favorable terms for you to repay your unsecured loans.
Creditors accept risk when they lend people money. There is always the possibility that you will not be able to repay them in full. If your financial situation shows you may soon go bankrupt, for example, the creditor risks losing everything they lent you. Unsecured loans are low down on the list in bankruptcy settlements, so they are often willing to look for a way to recover at least some of their outlay.
This is where a debt settlement attorney can come in. They negotiate with creditors to get you a better deal. A typical transaction might be for you to repay only 50% of the balance but do so within the next 14 days. The creditor accepts, as they at least get some of their money back. You cut your debt in half at no additional cost to you!
The debt relief attorney will usually be able to get a better deal if you still have some cash or a solid income coming to you. While it’s possible to get extended terms, longer repayment periods, or reductions to your debt simply by paying faster, you definitely have a better hand if you’re able to offer a quick lump sum.
First, we must recognize that some companies are willing to take advantage of people who are already in a poor financial situation. A bad debt settlement lawyer may take on your case knowing full well that the amount they’ll be able to save you is unlikely to be more than the fee they charge, leaving you in a worse financial situation overall.
So, it’s important to do your due diligence on the debt settlement attorney you choose. How long have they been in business? Do they have positive, genuine reviews online from people who have used their service in the past? Remember to check multiple third-party websites, as reviews are easy to fake online.
Each state has its own rules on bankruptcy and debt, so you inevitably need a debt settlement attorney that works in your area and has worked in your area for a long time. Don’t accept a lawyer that seems to suggest they can work in multiple states, as they won’t have the requisite knowledge to get you the best deals.
For example, the property that is exempt from bankruptcy is different from state to state. This can make a big difference in whether bankruptcy, debt consolidation, or debt settlement is the right choice for you.
A poor debt settlement lawyer will tell you it’s the answer to all your cares; just sit back and they’ll take care of everything. A good debt settlement attorney will advise the pros and cons of all your options.
Bankruptcy is sometimes a good option, as it’s a quick cleanse of your debt and you can be back to a reasonable credit score within a few years. Going for a debt settlement approach can mean you’ll have to pay much less debt, but it opens you up to the risk of being sued. Unsecured creditors can attempt to get a judgment if you’re in default. This can result in wage garnishment or new liens on your property.
All these factors are important to how you proceed, so the debt settlement attorney must take them into account. Debt relief lawyers can handle creditors and debt collection agencies for you, and advise on managing any lawsuit for settlement. Experienced lawyers will give you good advice on exactly when to accept any offers given to you.
Ultimately, a strong debt relief attorney will be a fantastic ally for anyone struggling with significant debt.