Debt Relief: DIY or Hire an Attorney?

With the economy finally recovering, there are still vestiges of what many of us had to do to weather the prolonged economic downturn. This included trying to maintain a certain lifestyle while wages stagnated and continuing to pay our obligations by borrowing funds or by not paying them at all.

Radio, television and the internet are full of ads for debt relief companies who claim they can substantially reduce your debt or principal. Some of us may have received debt reduction proposals directly from the creditor or collector that may shave off half of what is owed. For many, that is still an unaffordable expense. Statistics from investigations of the debt settlement industry show that less than 10% of individuals who sign on with debt settlement companies actually complete it. Many of these companies charge considerable upfront fees or they have you paying over 36 or 48 months. The question for the rest of us is do we hire an attorney to do we try to settle the debt ourselves?

Can You Do it Yourself?

In some cases, you may be able to settle the debt on your own, but you obviously need the financial ability to do so. Also, settling yourself means no debt settlement fees. Though your credit score is suffering, the longer you go without paying a debt, the more favorable a resolution within your means is possible. Studies indicate that a typical debt settlement is 20% of what you owe. If you owe $10,000, you may be able to settle for $2,000 if your debt is old enough and you can pay that amount either all at once or within or one year at most. If you want payments spread out for longer than 12 months, the less likely the creditor will agree to settle for a smaller percentage of the debt.

One thing to consider if you are being harassed by a collection agency is whether you should pay the debt at all. The debt industry includes the selling and buying of debt instruments, many of which are sold to collection agencies at greatly discounted prices but with none of the original documents, if any, that evidence the debt. If a collector is harassing you, ask to see documentation that you owe the debt. In many cases, the collector will do anything to try and convince you that such evidence exists though no actual documentation will ever be provided. In cases like this, do not pay the debt as the collector cannot prove in a court of law that the debt ever existed.

When to Hire an Attorney

It becomes necessary to hire an attorney to defend you in a collection matter if the debt is large and a lawsuit is filed. In some cases, your attorney can provide certain affirmative defenses such as an expiration of the statute of limitations or laches. In other cases, your attorney can negotiate a settlement on terms that you can afford or at least force the creditor to provide documentary evidence of the debt.

Should your debt be overwhelming and you lack the financial wherewithal to pay the debts, you might want to consider Chapter 7 bankruptcy or a Chapter 13 if certain conditions exist where a repayment plan under the auspices of the court would be more beneficial to you. In these circumstances, consult with a bankruptcy attorney.