Attorney Debt Negotiation or Debt Settlement Company? |
By Kenneth Long on October 25, 2010
.jpg.aspx?width=75&height=75) When trying to settle large debts for smaller amounts, you may be tempted to ask for help from a debt settlement company. You may also see ads touting attorney debt negotiation as an alternative to debt settlement companies. The reality is that many firms rarely deliver as promised, and you could end up owing much more as a result!
Debt settlement companies claim they can negotiate debt balances down to 30-50% of what you owe. However, even the "successful" clients find out that the savings are often much less than that, and many end up paying more than they originally owed. Now that the Federal Trade Commission has restricted debt settlement companies to end upfront payments (the source of much of the abuse), debt settlement companies are struggling to restructure their operations. In this new pay for service model, debt settlement companies are finding they will go unpaid since most clients are not actually served. As a result, it is expected that most debt settlement companies will shift to promoting bankruptcy, since that option still allows for upfront payments.
Many companies promoted their attorney debt negotiation models. After all, it makes sense to use an experienced attorney to protect your rights when you are facing mounting debt problems. The problem with this approach however is that many of these large firms failed to actually provide attorney representation. Most of these debt relief firms that promoted attorney debt negotiation never even matched an attorney with the debtor. They instead utilized low paid paper pushers to run letter campaigns to creditors, letters that went largely ignored.
Consider the Hess Kennedy Chartered LLC and the Consumer Law Center debacles. Both claimed protection through their attorney debt negotiation services, yet attorneys were not actually involved in the process. While owner Laura Hess was an attorney, she did not represent the clients of the firm. Both firms were eventually shut down and placed into receivership due to fraudulent practices. Clients only received 25% of their funds in eventual refunds.
Allegro Law LLC was also shut down for similar problems. Allegro's clients are still waiting for refunds. Attorney participation in clients' cases is often dubious at best at the mega firms.
If you truly want the benefit of attorney debt negotiation, consider hiring a licensed attorney directly. Not only do you normally get much better advice and representation, the costs are actually much cheaper to go this route. Instead of paying thousands of dollars in fees for nonexistant services, you are likely to pay a few hundred dollars for time actually spent working on your behalf.
There is also another advantage of working with an attorney. If you truly need protection from creditors that is unavailable through a debt settlement plan, you can get advice on bankruptcy rather than being sold on a plan that will ultimately fail.
Of course, either option is geared toward debtors who have massive charged off debt balances. Those who still owe their original creditors should seek credit counseling as the primary means for addressing their problems.
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