You should consider all of your options in dealing with your credit card and other unsecured debt. The decision you make may be one of the most important financial decisions you ever make. Your prospective attorney will discuss all of these options.
The options include:
1. KEEP PAYING EACH MONTH AS YOU PRESENTLY DOING.
This may not be an option for you as you may, due to some type of financial hardship, be unable to continue paying. If you are able to keep paying you should know that if you pay close to, or only, the monthly minimum required payment on your account it will take years and years to ever get your debt paid. Due to the accumulation of interest you will pay many times the amount that you presently owe. If you are late with your monthly payment and/or if your account goes over your credit limit you will be charged onerous fees. Additionally, your rate of interest will most likely be increased. Credit Card companies are masters at squeezing out as much money from you as they can.
2. TRY TO SETTLE YOUR FINANCIAL OBLIGATIONS WITHOUT PROFESSIONAL HELP
Before seeking attorney help many clients have already tried to settle their debts themselves. They have found that it is difficult, if not impossible to do unless they have the ability, skill, time, patience, dedication, and most important a great deal of knowledge about debt negotiation and settlement. They also find that a good understanding of the law regarding their rights as debtors and consumers as provided in the Federal Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA), the Fair Billing Act (FBA), Federal Trade Commission (FTC) rules and regulations, and other consumer laws is critical. Most find, in addition to being unproductive, the experience is unpleasant and frustrating. They finally give up. It is not uncommon for clients to say, “I should have got a lawyer a long time ago”. It is much better for an attorney to “plead” your case rather than you trying to do it yourself.
3. DO NOTHING
This is probably the most dangerous path you can take. Credit card companies and bill collectors are tenacious. They not only want to get their money back, they want to extract as much money from you as possible. Without proactive action your financial problems will not go away. They will only get worse! In the information age of today you will not be able to hide from your creditors, bill collectors, or debt collection attorneys. They can and will locate you. You will be living in constant fear regarding when and what action they might take. To do nothing will cause you extreme difficulties. Your chances of getting sued will greatly increase.
4. FILE FOR BANKRUPTCY
Because of the negative perceptions generally associated with filing for bankruptcy, most people are loath to take this step. Due to changes in the Federal Bankruptcy Code, filing for Chapter 7 (liquidation) or Chapter 13 (reorganization) can be difficult and not give you the relief you desire. You should consult with your prospective attorney about this option.
5. CREDIT COUNSELING
Most people who are having financial difficulties find that credit counseling does not solve their problems. Since some credit counselors work for and are paid by credit card companies, they serve the interest of the credit card companies rather than the interest of the consumer. The interest of the credit card companies is to keep you paying and extract as much money from you as they can. Most likely, through credit card counseling, you will end up paying off the entire balance rather than a reduced amount. Your financial nightmare will continue for years.
6. DEBT SETTLEMENT
For most individuals having financial difficulties, debt settlement, when provided by an experienced, licensed, attorney provides the best solution for obtaining financial relief from oppressive, unmanageable debt. Although when professionally done, the positive aspects of debt settlement are many, you should know that there are negative aspects as well. Your prospective attorney will discuss these negative factors and their possible ramifications as they relate to your particular situation.
Positive aspects of attorney debt settlement include, but are not limited to the following:
a). You will be debt free
b). You will pay substantially less to pay off your debt than you presently owe
c). You can be debt free in months, not years
d). Your monthly payments will be less than you are presently paying to your creditors
e). Attorney fees charged are very reasonable and can be paid monthly over a period of time.
f). You will get legal advise and representation regarding all aspects of settling your debts.
g). Your debt settlement process will be risk free
h). You will get peace of mind regarding your financial circumstances
Among others, negative factors of debt settlement include:
A). Your credit score will be negatively impacted possibly causing you difficulty in securing loans, getting credit, and obtaining new credit cards. Most likely if you have been falling behind on your credit card payments your credit score has already been reduced. In most instances, with proper financial management, the passage of time, and an improved credit history, your credit score will improve. Your attorney will give you advise regarding to how you can improve your credit score and improve your credit worthiness.
B). Once you stop paying on your the credit card companies will continue to charge interest, late fees, and possible over limit fees. Most likely they will raise your rate of interest. Your attorney will include the added interest and fees when negotiating settlement.
C). Once you stop paying on your accounts the credit card companies will most likely close your account.
D). Under Internal Revenue Service rules, once an account has been paid, the credit card company must issue a 1099-C showing the amount of your debt they have forgiven. The IRS considers this to be income to you. You will be required to pay taxes on any forgiven amount over $600.00. You may, however, have some deductions you can take that will help offset this income. Your attorney will discuss this matter with you.
E). Any time you owe money and do not pay it you may be sued by your creditor. When talking to a debt settlement company the representative will try to make you believe that your chances of getting sued are remote. Nothing is further from the truth. Credit card companies will use every legal remedy available. If and when suit is filed against you your attorney will be available to advise and represent you. Your attorney will respond to attorney “30 day” notification letters, file all necessary court documents, make all court appearances, and assist you with post judgment proceedings. Among other things, your attorney will discuss with you possible defenses you may have such as pleading the Statute of Limitations, raising questions about payment and total amount owed, etc. Your attorney will also provide you with information concerning the impact a final judgment will have on your home, other real estate you may own, your savings, retirement funds, 401-K accounts, social security and disability payments, etc.
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