Many people that I have met with have asked me my opinion about debt settlement companies. The advice I offer is to be diligent and research all of the options advertised. Most importantly talk with an attorney who has experience and knowledge in handling debt issues. In my opinion, the best way to do this is in a face to face meeting. In my experience debt settlement works only for a small percentage of people. For example, I recently read an article in the New York Times about debt settlement and some of the unknown consequences.
Downsides of Debt Settlement
The people who were interviewed for the article were unaware of some of the negative consequences of debt settlement. The article stated that you could face owing federal and state taxes for the amount of the debt that is forgiven. One man chose debt settlement because he believed he would lose personal possession if he filed bankruptcy. Another individual was surprised to learn how far her credit score had dropped after doing a debt settlement. This low credit score lead to a high interest rate on a car loan.
From my experience, and as this article points out, debt settlement can take years and usually does not settle all of the debt. Many clients come in to my office after being sued over their debt and the debt settlement company offers them no help in dealing with the lawsuit. The fees charged for debt settlement is usually 20% of the debt so trying to settle $10,000 may cost you up to $2000.
One of the debt settlement companies even states that declaring Ch. 7 bankruptcy may mean saying goodbye to most of the assets that you have accumulated over your life. Again, very misleading as very few clients I have represented over the past 23 years lose any of their property. Even if a potential client has assets that may be lost if they go forward with a Ch. 7, there is a second option of filing a Ch. 13 reorganization or simply put, a debt consolidation plan.
It is extremely important to seek the advice of an attorney who is experienced is this area of the law. At Bond and Botes, we have been helping good people through bad times for more than 20 years. We always offer a free initial consultation to go over your particular situation so do not procrastinate. This article also quoted a former credit counselor who now runs a get out of debt website which I feel the necessity to comment on. He states, “Credit counselors hate debt settlement companies, debt settlement companies hate bankruptcy attorneys, and bankruptcy attorneys hate everybody.” I can assure you that my partners at Bond and Botes and I do not hate anyone. I may not like the way a creditor or debt settlement company has treated my client, but I do not hate them.
Robert Reese is a Managing Attorney at the Bond & Botes Law Offices in Birmingham, Alabama. He holds a Bachelor of Science from Jacksonville State University, and a Juris Doctorate from the Birmingham School of Law. Robert is also a member of the National Association of Consumer Bankruptcy Attorneys (NACBA). Read his full bio here.