Read this before hiring a debt collection attorney
If your debt has spiraled out of control, there are multiple ways you can fix it, one of which is to hire a debt collection attorney.
Yes, that sounds serious, but so is debt.
In the five years leading up to 2022, there was a 20% drop in the number of consumers whose credit had reached collections status on their credit reports, according to the Consumer Financial Protection Bureau.
Even so, household debt levels fueled by credit card balances are still on the rise —a situation that creates a slippery slope between debt and collections.
If you are being targeted in a lawsuit, there are both federal and state laws that will affect the outcome. In this situation, debt collection lawyers can help you understand your rights as a debtor and potentially benefit your situation.
But not every situation calls for bringing a debt collection attorney into the mix.
You might be able to put your debt behind you with the help of a settlement company, or by taking some strategic steps on your own.
Read on to understand the role of a debt collection lawyer and whether they may be the best solution to bring your personal finances back into good standing.
What is a debt collection attorney?
A debt collection attorney is one who specializes in the area of debt. They can represent either debtors or creditors.
If you find yourself on the receiving end of a lawsuit, you’ll want to find a debt collection attorney whose practice focuses on your type of legal problem.
Keep in mind that debt collection lawyers are not free, though each attorney’s fee model is unique.
While a debt collection attorney will help you to traverse the legal terrain, don’t expect them to wipe out your debts altogether.
They will defend you and your legal rights against collection agencies so that you are not being harassed. And if need be, they’ll represent you in court, or handle any paperwork between you and your creditors.
A debt collection attorney might also help establish a manageable repayment plan based on your income and other expenses.
Or, they could successfully negotiate lower balances on your debt commensurate with what you can afford.
Debt collection attorney vs. debt settlement companies
If your situation has escalated to reach legal action, you’ll want to seek out the advice of a debt collection attorney. They can defend you in court if need be.
At the very least, they can provide legal counsel so that you are aware of all your options.
But if your creditors have not yet taken legal action, you have other options, including debt settlement companies.
Debt relief companies similarly act on your behalf with creditors, promising to either lessen your debt load or come up with better terms for the debt. There are pros and cons involved with both choices.
Pros & cons of debt collection lawyers
If you’ve got questions about how to respond to debt collection agencies, a licensed debt collection lawyer should be able to provide you with the guidance you need.
A good debt collection attorney can advise you of your options, such as negotiating with your creditors or filing for bankruptcy protection.
Attorneys swear to uphold the highest ethics in their practices. But just like any profession, there may be some bad apples in the bunch. You could find yourself stuck with a bad lawyer. Caution, scrutiny, and research are your allies.
Chief among the risks is thinking you've hired a debt collection lawyer when in reality you've engaged a debt settlement company posing as legal counsel.
A good rule of thumb is to meet with a local attorney in person before signing on the dotted line to ensure they are who they say they are and are available to you.
Pros & cons of debt settlement companies
If the debt settlement company is successful, you will be cleared of your debt for less than you originally owed. Lower balances can mean you'll be able to pay off your debt sooner.
Now for the cons. Be wary of debt settlement companies that promise you the world. There are no guarantees that they will be able to successfully negotiate with your creditors, so it’s important to go into the relationship with your eyes open.
High fees are another risk, something debt settlement companies tend to require upfront. They’ll also advise you to stop paying anything toward your balances with the view of settling with your creditors later.
But that approach is risky and will not stop the late fees and over-the-limit charges from piling up. It can also damage your credit, hurting your chances of getting approved for credit in the future.
The DIY approach
If neither a debt collection attorney nor a debt settlement company appeal to you, and you still have time before your situation escalates, consider taking the do-it-yourself approach.
Debt consolidation: You might still be able to qualify for debt consolidation, which could lessen your monthly payment.
In this case, you apply for a loan with better terms, such as a more attractive interest rate and lower monthly payment, then use the proceeds to pay off your other creditors.
Debt settlement: If you fancy yourself a good negotiator, you may be able to talk your way to a lower balance compared with what you originally owed. If it’s not too late, you may still be able to come up with a settlement before your account goes to collections.
Budgeting: Drumming up a monthly budget will help you stay on top of your debts so that you are making at least the minimum payments. There are plenty of money apps out there that will help you to create a list of your income and expenses and offer tips on how you can save or earn more money.
The choice is yours
Excessive debt may represent the mismanagement of personal finances, but it is just that — personal.
By choosing to bring an outsider into the situation, including a debt collection attorney, you are admitting that you need help. So, be selective about who you hire.
Whether or not a debt collection lawyer is the answer depends heavily on your unique circumstances.
You can always consult with a professional first, then determine whether or not a debt collection attorney is right for you.