How does a lawyer settle debt?
Debt Reduction Lawyers in New York
There is no simple formula for debt reduction. There are a variety of qualification factors that our attorneys will analyze before deciding to take on a client.
Some of the major factors are:
- Is the account in default? Our lawyers cannot attempt to negotiate a credit card or student loan debt unless the account is in default status. For automobile repossessions, the lender must issue a deficiency balance. Learn more about the consequences of defaulting on student loans.
- Does the client have an ability to pay back a reasonable portion of the debt, either in lump sum, monthly payments, or a combination of both? We can only attempt to negotiate a debt if our client has funds available for settlement, or can acquire funds at the time a settlement is achieved. Funds may be pooled from any source, such as: Employment Income, Savings, Retirement Funds, and borrowing from friends and family.
- Does the client have hardship? We are looking to identify reasons why the borrower fell into default, and furthermore, why the borrower cannot afford to repay the debt in full. Our attorneys want to present our client's in a positive light to collectors - that you are working in good faith to try to resolve the debts, despite the hardships you have encountered. Examples of hardship can include: loss of job, loss of financial provider, medical issues, divorce, etc...
Some other factors that we analyze are:
- Is the debt assigned to a collection agency, or was it sold? Debts travel through a cycle. Initially, the account is with the original creditor. After the account defaults and charges-off, it is oftentimes sent to a third-party collection agency. It may be re-assigned by the original creditor to several collection agencies, and ultimately, the debt might be sold to a debt buyer, or it can be sent to a law firm for review for a lawsuit.
- How long is the debt in default status?
- How much is the balance? (Principal/Interest/Fees)
Attorney-Assisted Debt Reduction Process
As part of our process, our attorney's will compile the client's various hardships and will convey it to the collectors in a light most conducive to the negotiations. We may provide the hardship information by phone, or in a written hardship letter. We may also share our client's income information and the source of the proposed settlement funds. We may bolster the evidence of income by providing a copy of the client's most recent tax return. We restrict the disclosure of income, tax, and employment information to situations where we believe that providing the information will be in furtherance of achieving our client's goals. We don't provide any information that we believe can be potentially used against our client.
When we make an initial offer to a collector, we shoot low so we can try to elicit a counteroffer. This helps us gauge whether the current collectors are amenable to an arrangement that is affordable to our client. If it seems that the current collector lacks the authority to approve a sufficient reduction, we may strategically seek out another collection agent (or supervisor), or wait until the account gets transferred to another agency.
When our attorneys achieve a firm offer for settlement, we share this information to our client, and we advise as to whether we think further negotiations may result in a greater debt reduction. If our client is comfortable with the settlement terms, we request that the settlement be reduced to writing and we provide our client with the payment instructions. If the current settlement offer is unacceptable, we will continue negotiations on the debt in an effort to achieve a further reduction (pursuant to the terms of the retainer agreement). This gives our client's the comfort of knowing that they are in control of when the debt is settled.
