His main job is to negotiate with your creditors to help you make a deal that will get you out of debt without having to declare bankruptcy. The aim is to reduce the total amount of money you have to pay. And it is usually possible to get away with paying a lump sum of 40% to 60% of your current outstanding debt. Another important part of the deal is for him to stop all fees and reduce the interest you are paying. This is a large part of the savings you will end up making. He also takes care of all communication with the companies you owe money and not having to deal with collecting calls can be a huge relief. When it comes to your credit report he is in charge of correcting any misleading information that has been reported there during the process of debt settlement.

In order for the credit card companies to even want to talk to you about a deal you have to be at least four to six month behind on your payments. If you keep up with the minimum payments you are a perfect customer for the credit card companies and they are making good money on you. So if you haven’t already fallen behind your attorney will tell you to stop paying on your loans and start saving up money for the lump sum instead.

You should however be aware that he will not be able to remove the notices about late payment from your credit report, but the main debt will be written off as “settled as agreed”, “settled” or “paid as agreed”. He is also only able to help you with unsecured debts as credit cards debts or medical debts. If you are dealing with secured debts like student loans or mortgages he won’t be able to help. And he is not able to give legal advice or represent you in court so in the unlikely case of you getting sued by your creditor he is unable to help and will most likely have to drop the case.

Now that you know what a debt settlement attorney is you can go on to some of the other articles here to see if you need one or not.

First of all the attorneys need to make money – it’s their job. But as you know from all other areas of life there is many ways of going about that. Some people only care about the money. While others only care about helping and most fall somewhere in between. So yes there are genuine people out there who really want to help you out of your awful situation – the kind of people who take pride in their job and are willing to walk that extra mile necessary. And there are definitely also people in this business that primarily are out to benefit from others misery and use questionable methods at best.

Research is the key to finding honest and reliable people to work with if you decide to get professional help and debt settlement is the right solution for you. Start out by searching out your local debt settlement attorneys and do a Google search and make a list of all the potential attorneys. Next step is to look at their website to see if it looks reliable and to see if you can find any negative information about them with another Google search. This will help you get rid of the worst from your list and then you can proceed to contact them. There is no better way to judge whether they have your interest or not than by talking to them. And if you talk to a few different you will get a sense about what to look for. In this process of talking to potential attorneys make sure to ask about price policy and how they will assist you through the settlement.

As you can see there is no easy answer to the question and the attorneys out in the real world fall on both sides of the scale, but if you do a little research you should be able to find someone who will be able and willing to help you out of debt. Make sure to read the other articles on this site for more information to help you make a wise decision when it comes to these important financial questions.

Know where you stand
Step one is to face the facts about your situation. You need to know exactly where you stand before you start to contact your creditors and start the negotiation. This can be painful, but it is a necessary step and if you skip it you will likely make costly and avoidable mistakes later on. To do this make a list of all your debts and add up the total amount of debt you have. Next note if the debts are secured (ex. mortgage and tax debt) or unsecured (ex. credit card debt and medical debts) and priorities them (secured debts are more important than unsecured). And finally get your credit report to see who owns your debts. They might have been turned over to collecting agency or another company. Add the owner of each debt along with contact information to your list.

Prepare
Now that you know where you stand it’s time to prepare to contact your creditors one at the time. Before you actually get on the phone it’s a good idea to have a plan. First of all you have to come up with an offer for how to settle your debt. This can either be a lump sum or a monthly payment. The lump sum is preferable if you are able to come up with the money because it can get you a better deal. A onetime 40% to 60% payment is what you want to aim for. Also make sure that they stop all fees and high interest on your account. Present them with a specific time plan on how and when you will be able to pay. And remember your creditors are not likely to discuss a settlement unless you are at least four to six month behind on your payments. So if you aren’t behind already you have to stop paying and if possible start saving up money for the settlement. A last thing to do before the call is to get a copy of your latest bill in front of you.

Contact your creditors
When you call your creditor avoid profound language. You are trying to make a deal and that’s easier if you get along with the other person. Also the conversation might be recorded. Inform them that you are trying to solve the problem and want to speak to the person in charge of settlements. If you happen to get a person on the other end that doesn’t want to cooperate at all come up with a reasonable excuse to get off the phone and call back later. The alternative is to write a letter outlining your offer and time plan. Make sure to get the deal in writing if you make one. In the case of a lawsuit you need to be able to prove a deal has been made.

As you can see making your own settlement is a serious alternative to attorney based debt settlement, but there are some risks and a fair amount of work involved.

First of all it’s illegal to profit by debt management in twelve of the American states. The states are: Arizona, Georgia, Hawaii, Louisiana, Maine, Mississippi, New Jersey, New Mexico, New York, North Dakota, West Virginia and Wyoming. So if you live in one of those states you need to be aware that it is illegal for a debt settlement attorney network to contact and work with you. It doesn’t matter if they operate from another state. Some companies disregard the law, but you should consider if you really want an attorney who is breaking the law by working with you.

Second it is only possible to settle unsecured debts. In this category you’ll find credit card debts, medical debts and department store card debts. Examples of secured debts that you can’t settle are student loans, mortgages, tax debts and alimony.

To settle your debts is usually only advisable if you are unable to pay off the full amount of your debt one way or another, because your credit report will be affected negatively by this option. And if you find yourself so deep in debt that you are unable to actually pay it off, there are still other options like bankruptcy that might be preferable in your case. My advice is to get someone who isn’t trying to sell you a solution to look at your case and help you determine the best solution for you. Unfortunately it’s hard to write specific advice in a general article like this because there are many things to take into consideration.

If you speak to a debt settlement attorney he might not inform you about the tax consequences of this option, but if you manage to make a deal the savings you make is taxable income if they exceed $600. In a few cases the tax will actually put you in a worse situation than before.

And last but not least a large percentage of what you save from making a settlement on your debt will have to cover your legal expenses. Getting professional help is a costly affair and it’s common that you need to pay a fee upfront, monthly charges and a percentage of either the total debt or the saving when the deal is done. The alternative is to take the bull by the horns and do it yourself.

You basically have four options if you are in debt: To go on as before, credit counseling (also known as debt counseling), bankruptcy and debt settlement. Let’s look at them one at a time.

To go on as before
At least in theory it’s possible to just keep paying those minimum payments and pay of the loan the hard way, but since you are reading about debt settlement that might not be a practical option any more.

Credit counseling
Theoretically it’s a process of educating the consumer to help them avoid getting deeper into debt than they can handle. In the real world it’s more focused on establishing a plan for debt relief. And it may involve stuff like looking at spending habits, getting rid of credit cards and establishing a debt management plan with your creditors(getting one big loan with lower interest rates instead of many small). This is however not always enough to solve the financial difficulties of people in serious debt.

Bankruptcy
Is basically saying you are unable to pay your debts and is usually considered as a last resort because of the negative consequences, but none the less a valid option to consider if you are in serious debt. The advantage is you will be completely relieved of your debt, but there are a number of legal and social consequences.

Debt settlement
Is agreeing on and paying a onetime fee of between 40% and 60% of the outstanding debt and have the creditor forgive the rest. This of course is not something the creditors are interested in if they can get you to keep paying the minimum payments. So you are not likely to hear about this option from them and they usually won’t even negotiate before you are behind on the payments. On the other hand when you start falling behind they are more interested in a settlement than taking the risk of you declaring bankruptcy and not getting anything. If you settle your debt the debt will be removed from your credit report, but the late payments may remain. If you consider this option you should also consider if you need an attorney for debt settlement or if you want to do it yourself.

If anyone seeks for some services from a debt settlement company then they need to pay hundreds of US dollars in the form of admission fees along with some monthly service charge. However this service charge is variable in nature and depends on your debt amount. These companies usually adopt two general modes of payment to your creditors from your side. Either they may adopt hand to hand mode of payment which in turn depends on your monthly payment which company use to transfer to your creditor’s account after deducing their interest. The second mode of payment that the debt settlement companies use to adopt is the lump-sum mode of payment. In this mode, company receives monthly payment from debtor but do not make payment to their respective creditors on monthly basis. However he collects the entire amount and then makes complete payment as a whole.

The first method is the legally accepted method however the second method is just meant for deceiving. Most of the time, company makes payment by adopting second method by not making payment every month to creditors. In this creditor’s interest goes on rising which is not informed to the debtor. In this way, debt settlement companies cheat their customer and also these facts are never disclosed in front of him before he pays the admission fees. Eventually he knows everything in the future but gets disabled to change the company as he had already deposited the entire fees to the company.

However there is one more good reason to get rid out of such debt settlement companies. The negotiation that they do with the creditors can be done by you also. In fact you can discuss with your respected creditors so as to get agreed in making little amount of monthly payment at a time and also you can request him to impede all the interests and late fees and charges from growing. In this way, you can yourself save thousands of US dollars as you won’t need to pay any more to debt settlement companies.