What Are Debt Settlement Agencies?

If you are in debt, you may have seen the ads for debt settlement agencies that offer to help you resolve your debts for a fraction of what you owe. However, before you contact a debt settlement agency, schedule a consultation first with an Oklahoma City debt settlement lawyer.

Is working with a debt settlement agency a good way to resolve your debts? Exactly how do these companies settle debts? Do consumers have a better option? What will an Oklahoma City debt settlement attorney do on your behalf that a debt settlement agency will not do?

If you’ll keep reading this short explanation of debt settlement agencies and how they work, you will learn the answers to these questions, and you will also learn about your other (and perhaps better) options for settling your debts, rebuilding your credit, and moving forward with your life.

Are Your Debts Overwhelming You?

Even if you earn a good income, a serious illness, a divorce, or even something like a natural disaster could make it difficult to pay your debts. Emergencies can happen to anyone. You could be unexpectedly burdened with a debt that you did not choose and could not have anticipated.

A credit card can rapidly get you into debt trouble when your bills pile up and you have no other way to pay. Debt collectors are often relentless, and if you owe on a loan or if you’ve extensively used a credit card, harassment by a debt collector may only be the beginning of your difficulties.

Many consumers in Oklahoma face vehicle repossession or foreclosure on a home. Your wages could be garnished, or you could be sued and taken to court by a creditor. If you need help with your debts, the first step is to schedule a consultation with an Oklahoma debt defense attorney.

What Will a Debt Settlement Agency Ask You to Do?

Debt settlement agencies help some Oklahoma consumers settle their debts, but for many consumers, working with a debt settlement company will be an expensive mistake. How do these debt settlement agencies work?

A debt settlement agency may tell you to pay nothing to your creditors for several months, sometimes six months or longer. When your payments become considerably overdue, you make an offer to settle the debt – for a small lump sum amount – in exchange for wiping out the debt.

Your creditors may accept this offer, but a creditor may also reject the offer and sue you for the debt or turn the debt over to a collection agency. If the offer is accepted, the debt settlement company gets 25 percent of what you have saved, and you may owe the IRS another 25 percent.

What Will a Debt Settlement Agency Do for Your Credit Rating?

If you are thinking that settling your debts through a debt settlement agency will automatically improve your credit rating, you’ll need to think again. The method that a debt settlement agency uses to settle your debts will actually hurt your credit rating because:

  1.  You stopped making regular monthly payments to your creditors.
  2.  You did not pay your debts in full.

It can take as long as seven years after your debts are “settled” by a debt settlement agency to reestablish your credit and to qualify for a credit card or a mortgage.

What Are the Other Disadvantages of Working With a Debt Settlement Company?

If your circumstances are so dire that you cannot make any payments at all on your debts, then a debt settlement agency is not the answer for you. You must offer a lump sum amount of at least 25 percent of what you owe. An offer for any lesser amount will automatically be rejected.

Debt settlement agencies are not lawyers. They can’t take legal action in your defense or on your behalf, and they seldom provide long-term, genuine debt relief. On the other hand, an Oklahoma City debt settlement lawyer can help you obtain the genuine and permanent debt relief you need.

Is Bankruptcy Right for You?

After a full review of your financial circumstances, an Oklahoma City debt settlement attorney will recommend the debt relief alternative that is right for you. When you are trying to get out of debt and become financially stable, you must have legal guidance that you can trust.

You may have several good options for resolving your debts and reestablishing your credit. Even bankruptcy, which is generally perceived as a last-resort option, may be preferable to working with a debt settlement agency, because bankruptcy lets you quickly rebuild your credit.

If you and your attorney determine that bankruptcy is the best way for you to resolve your debts, you will need to know what debts are erased through bankruptcy and what debts remain. You’ll be allowed to keep part of your assets, but most of your assets may be liquidated to pay creditors.

What About Other Options?

When you file bankruptcy papers, the bankruptcy court will issue an “automatic stay.” An automatic stay is a court order that prevents creditors and collection agencies from harassing you with calls and letters or taking any legal action against you.

That is a benefit, but bankruptcy also means losing a large percentage of your assets, and a bankruptcy may damage your credit rating, at least temporarily. Moreover, bankruptcy discharges only unsecured debts: credit card debt, retail debt, and medical debt, for example.

Unpaid taxes, unpaid child support, fines owed to a court, and student loan debts are “secured” debts that are not erased through the bankruptcy process. A debt defense attorney will help you consider your alternatives to bankruptcy with the aim of discharging all of your debts.

How Can You Learn More?

Many creditors will work privately with you to restructure your payments and interest rates, and an Oklahoma debt settlement attorney will negotiate on your behalf with those creditors for a settlement agreement that you can afford – without making you homeless or destitute.

It’s easy – and it will cost you nothing – to find out more about your legal rights and options or to begin the process of getting out of debt. Call the offices of an Oklahoma City debt defense lawyer to schedule a no-cost, no-obligation case evaluation.

You will receive the personalized, detailed legal advice you need to begin getting out of debt. If your debts are overwhelming you, make that call today.