Debt Settlement Attorney versus Debt Settlement Company. Pros, Cons & Alternatives.
If you are dealing with a Credit Card lawsuit or for that matter any legal issue involving debt, you may have heard or read about Debt Settlement. Perhaps not. So, what is this mysterious term and what does it mean? It’s not that complicated, or is it?
Some would argue that Debt Settlement is self-explanatory. It means to Settle your debt. The real question however, is whether to have your Debt Settlement handled by a Debt Settlement Attorney or a Debt Settlement Company?
A Debt Settlement company may profess to settle your debt, including your Credit Cards. However, what can they do when the settlement involves the law and legal parties? What if your Credit Card sued you or is garnishing wages?
In other words, a Debt Settlement company may be successful in one or two settlement negotiations. However, a Debt Settlement company CANNOT represent you like an attorney can. This means that if there is a lawsuit or garnishment, a Debt Settlement company are legally barred from representing you. Afterall, a licensed Debt Settlement Attorney can handle everything related to the law and thus may embark on negotiations and when necessary, prepare and file the legal documents necessary in a lawsuit or to exempt a debtor from wage garnishment.
Moreover, the privilege of confidentiality ONLY EXISTS between a client and Debt Settlement Lawyer. More importantly, a Debt Settlement Attorney will charge you hourly or a flat fixed fee. On the other hand, a Debt Settlement company do not disclose their fees and compensation. Rather, they want you to pay a fixed amount to them every month, that they claim is put into escrow (it is unclear how they can even have an escrow account), and that eventually (whenever they so deem, usually after the Debt Settlement company has collected as much money from you as possible), they claim they will settle your Credit Card or other debt.
A debtor needs to know exactly how much money they are paying and are entitled legally to obtain a breakdown of exactly where their funds are going. One will not receive such a breakdown from a Debt Settlement company. Beyond having no legal powers and putting your hard-earned money into a so-called escrow account, a Debt Settlement company will never provide the debtor with a refund in the event they do no work on the case.
A licensed Debt Relief Attorney has gone to university for 3 years and attended an American certified Law School for another 3 years. They are trained professionals with whom you can build a relationship and talk about anything confidentially. Your attorney will have experience negotiating Credit Card settlements and will know and have experience dealing with wage garnishment. There are easy ways to find a Credit Card Debt Negotiation Lawyer. One can look online. Or, one may decide to call their local State Attorney governing body and seek a referral, the governing body that governs attorneys is usually called the Bar.
As a dedicated Credit Card Debt Attorney, licensed and practicing Credit Card debt relief in New York, Florida, New Jersey and Connecticut, I receive a fair share of clients that originally went with a Debt Settlement company to try to settle their Credit Card debt. Later these same clients are sued or wake up to find their wages are being garnished. Unfortunately, they learn a very difficult lesson. There is usually no recourse to take against the company and one is usually stuck with a minimum wage customer service agent that will not provide updates or information. Frustration grows and soon the mess becomes a snowball rolling down a bumpy mountain.
This is when I usually receive a call from a desperate client. The explanation is usually the same they thought the Debt Settlement Company were legitimate and they were told by the company that it can handle any legal issues that arise. The proof is in the pudding as these clients can attest. There was no negotiation or attempts to settle their Credit Card debt. Instead, the Debt Settlement company were so focused on collecting as much money as possible from the client for their alleged escrow account.
Avoid Debt Settlement “programs” or Debt Enrollment Systems. Despite sounding fancy, these are alternative names for a Debt Settlement company. Also, if you decide to chance it and take the plunge make certain the Settlement company is duly licensed in your State as a Debt Settlement entity. It is stories like these that make me cringe. It is no wonder that each State has a plethora of laws governing Debt Settlement companies. It’s unsurprising but very sad when we learn of a settlement Ponzi scheme or an unlicensed entity claiming to settle Credit Card debt. In fact, a quick review online will unearth many lawsuits filed by the FTC (Fair Trade Commission) and State Attorney Generals banning certain Debt Settlement companies from operating further due to fraud, and or misrepresentation, amongst the most common claims.
Here at Credit Card Legal Clinic law firm, we are receiving more and more clients who were once signed into an alleged debt settlement program or had already paid exorbitant amounts of money to such companies and their debt was NOT settled. Companies “specializing” in debt settlement often take heaps of upfront money from the debtor, before performing any work, a violation of FTC and State Law.
Another factor to consider is the unwillingness of a Credit Card bank or issuer to engage in settlement negotiations with Debt Settlement companies. Another challenge is to have all Credit Card issuers working with the debtor. A Debt Settlement company cannot force a Credit Card issuer to embark on settlement negotiations. This means that some but not all ones Credit Card debt may be addressed but not all of it. This problem is all too common as the Credit Card issuers have their own collection attorneys and see no reason to engage with a Debt Settlement company. On the other hand, I can count on one hand the times a collection agency or Credit Card refuses to engage in settlement negotiations with a Credit Card Debt Settlement Attorney. The few times this has occurred, we simply filed a lawsuit or Answered the credit cards lawsuit and by them opening a can of worms, allowed us to Counter Sue and seek discovery. These are litigation tactics that only a licensed Credit Card Debt Settlement Attorney can bring.
Another factor to consider in making your decision about a Debt Settlement Attorney versus a Debt Settlement Company is that there are real legal tax consequences if one settles debt for less than what is owed. Most Credit Card Debt Settlement companies fail to inform the debtor of the IRS TAX CONSEQUENCE when a Credit Card debt is forgiven or settled. In other words, the IRS looks at debt forgiveness as taxable income: [“In general, if your debt is canceled, forgiven, or discharged for less than the amount owed, the amount of the canceled debt is taxable. If taxable, you must report the canceled debt on your tax return for the year in which the cancellation occurred.”] See IRS Topic No 431. Is forgiven debt taxable?
Worse yet, is the failure of the Debt Settlement company to contact the true and actual creditor making sure the party they are “negotiating” with is the actual debt holder and not a third-party collection agency without authorization to issue a legally binding settlement.
The solution to real, legal and lasting Credit Card debt relief is by working with an experienced Credit Card Debt Settlement law firm that is licensed, in good standing and that specializes in nothing else but Credit Card Debt Relief. At Credit Card Legal Clinic, we have settled or litigated thousands of Credit Card Debt cases. We do nothing else. Our law firm is dedicated entirely to the practice of Debt Settlement of Credit Cards.
With a qualified debt settlement attorney, one has the ability to view their fiscal standing and hardships in a comprehensive fashion, not in a bubble or vacuum of credit card debt alone. One is able to address and tackle the CAUSE and not the symptom and view and address ALL DEBT both secured and unsecured including credit cards, medical bills, tax liens, car repossessions, mortgage debt, judgments, garnishments and foreclosures if applicable.
This allows for a legal plan of action that is geared to eliminating all your debt as well as uncovering what is causing the debt to accrue. Perhaps the debts are so outrageous that the client is better suited for bankruptcy. This is a sensitive conversation and topic, one that should only be discussed and handled by a Debt Relief Attorney.
Empirical data shows that a Debt Settlement Companies monthly fee is so large and unfair that it puts the debtor into a deeper financial hole. On the flip side, an attorney must give a retainer agreement and layout in plain English up front, what he or she is doing for the client and how much it will cost.
A good attorney will not take money or start a case if they see that the client’s desires are not legally possible or there are no legal defenses. Also, a credible attorney will NEVER make promises or guarantees about success let alone promise total elimination or settlement. The settlement companies promise to eliminate 50% to even 90% of the credit card debt. No one can promise any figures especially when the credit card company or their debt collectors are under no legal obligation to talk, let alone negotiate. Nobody can promise results. No one has the ability to tell the future. On the other hand, a Debt Settlement Attorney has a duty and obligation to you and your case. We call this a fiduciary duty to process and work your case zealously and efficiently for the SAKE AND BEST INTERESTS OF THE CLIENT.
When a settlement is won, there is also the small matter of reviewing or drafting the settlement. This is legal and cannot be performed by a Debt Settlement company. Moreover, many Credit Cards try to trip up a debtor by including terms that allow the Credit Card company to still seek the differential between what was agreed upon or settled and that which is owed. For example, if $100.00 is owed and a settlement of $60.00 is reached, some Credit Card issuers will reserve the right to come after you even post-settlement for the forgiven $40.00. Most Credit Card Settlement companies are not even aware of this lingering issue.
A Credit Card Debt Settlement Attorney will make sure that a settlement RELEASES the client from any future deficiency judgments. Most importantly, the attorney has a trump card and bargaining chip. The credit card companies know that the attorney can eliminate the debtor’s credit card debt legally and in FULL by assisting their client with bankruptcy or by LITIGATING AND SUING THE CREDIT CARD COMPANY, BANK AND COLLECTION AGENCIES. Accordingly, it is in the best interest of the Collector to negotiate with a Debt specialist attorney.
There is myriad of different laws on the federal and state level that govern lenders and specifically credit card issuers and their collection agencies. An example of the more common being:
- The Truth in Lending Act (TILA)
- State Unfair and Deceptive Acts and Practices (UDAP)
- The Fair Credit Reporting Act (FCRA)
- The Fair Credit Billing Act (FCBA)
- State FDCPA laws.
One slip up on any of these laws and a competent Credit Card Debt Settlement attorney can litigate and sue the credit card company for such a violation.
Examples of violations include not providing the debtor with the necessary notices informing them of any increase in their APR (Annual Percentage Rate), unexplained late fees, or for mailing statements late. The list goes on. One thing is for certain, these laws and nuances are unknown to non-attorneys and before you know it, a Debt Settlement Company is negotiating with the wrong party or leaving you susceptible to a judgment for the amount of money forgiven or worse don’t recognize or know Legal Defenses and laws passed just for you.
Using an attorney and the opportunity potentially for litigation is a far superior and more successful methodology to tackling Credit Card Debt versus signing up with some clandestine and unknown Debt Settlement company.
A debtor gets the best of ALL worlds and solutions with a Debt Relief Attorney. He or she goes into “battle” with protections and weapons ready to fight the debt at its root. With experienced and effective counsel at their side, a Credit Card Debtor is best equipped to handle their debt and tackle it at its core. With a Credit Card Settlement attorney by your side, you are equipped and licensed to challenge ALL of the debtor’s debt. Sometimes even making money for the debtor in cases where litigation is appropriate and restitution applies.
Also, a Credit Card Settlement Attorney can drop the ultimate bomb and simply end it all, painlessly and effectively, by filing bankruptcy on behalf of the debtor when appropriate. Suffice to say, the attorney and debtor must look at the risks and rewards of filing bankruptcy on a case-by-case basis and analyze it in conjunction with the specific debtor’s situation.
As the economy fluctuates, we are being bombarded on TV and RADIO about “magical” debt elimination programs and “systems.” BEWARE, there are many unscrupulous folks and companies out there praying on those in debt and promising false results, while taking large amounts of money from the Credit Card debtor.
There are no short cuts in debt settlement. The matter is a legal one and thus requires a legal expert to help you. Whichever way you slice it, debt is painful. The faster and cheaper it takes to get out of it, the better. However, for all the reasons delineated above, make sure the methods used and players engaged in helping you settle your Credit Card debt are experienced Debt Settlement Attorneys. Make your decisions on facts and law not emotion or false promises. With the right partner standing shoulder to shoulder with you, you can settle your Credit Card debt and move on to a debt free future.
Good Luck!
Credit Card Legal Clinic
