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I know a lot of people that attempt to settle a defaulted debt without consulting an attorney. That might work out ok with small debts. I realize that hiring an attorney can be expensive so hiring an attorney may or may not be worth it when negotiating a small debt.
But let me explain why hiring an attorney generally is worth it if you are settling a larger debt.
First, it isn’t just about numbers. I have encountered quite a few people who have, without the help of an attorney, negotiated a debt settlement. Ok, so what’s the problem? The problem is that after they paid the settlement amount, some of them got sued for the same debt they settled!
When this happens, having a well drafted settlement agreement can save you stress and thousands of dollars.
Debt settlement agreements are contracts. So one question is, do you understand contract law well enough to negotiate a contract that will protect you going forward? Invariably, the unrepresented people I have spoken to have signed a contract drafted by the debt collector. What is the problem with that? It’s that the debt collectors are not trying to help you.
Let me give you an example to illustrate this point. I recently assisted a fantastic individual with negotiating a defaulted private student loan. We were able to negotiate a payoff amount more than $100,000 less than what the creditor said he owed.
After we negotiated the settlement amount the collector’s attorney “drafted” a “settlement agreement” and sent it over requesting the client’s signature. The “settlement agreement” wasn’t really a settlement agreement. Instead it was a debt acknowledgment form with the words “settlement agreement” written on the top.
The document would have done nothing to bind the creditor/collector to the agreement and would have instead helped the collector sue the client.
Of course, I recognized that fact and told them “Ha, nice try.” I then negotiated and drafted an agreement that would protect the client, both from the current collector and from future potential debt buyers. The collector eventually agreed to the terms I drafted.
You see, a great settlement amount isn’t actually great if someone can come back and sue you after you have paid the agreed upon amount. You have to think through the terms of the contract. You need to understand concepts such as indemnification, how to draft attorney fee provisions, and what representations the collector/creditor should make.
A second advantage to having an attorney assist you is that an attorney should recognize weaknesses in the collector’s case and should also recognize illegal conduct. If a collector, for instance, has violated the Fair Debt Collection Practices Act or is missing required documentation, a skilled attorney should spot this. Moreover, being able to point out legal shortcomings is immensely helpful in reaching a favorable agreement.
Hiring an attorney to assist you with negotiating a larger debt will normally save you time, stress, and money. While the above client is just an example and outcomes are never guaranteed, he saved thousands and thousands of dollars because he hired an attorney.
When shopping around for an attorney, don’t be afraid to ask questions. Ask if the attorney has experience negotiating the type of debt that you need help with. Also, make sure you get a written engagement agreement, and that you understand what the agreement is and how much you are paying. Finally, always verify an attorney is licensed to practice in your state.
If you live in Florida and need help, give me a call. (904) 419-9858.