Many consumers who are considering debt settlement encounter law firms that offer debt negotiation services. The concept of having the professional services of a lawyer is no doubt enticing and comforting. While some consumers have had success with this model, there are others who have not been so lucky for a variety of reasons. Below are some of the reasons that debt settlement lawyers may not provide the results consumers would hope for.

1. Law firms are not able to stop litigation from a creditor who is pursuing a past debt that you actually owe beyond the methods that a regular settlement company can use – namely setting up a payment or settling the debt before it gets to that point. Ultimately, the likelihood of legal action taken largely depends on the creditor’s own internal policy toward delinquent accounts and debt settlement in general and other factors that have to do with the client’s specific situation – like account activity prior to falling behind.
2. Often debt negotiation attorneys cannot actually provide legal advice. Most of the time they serve clients nationally, so unless they are licensed in your state, you’ll be paying extra fees for a law degree that cannot be put to use.
3. Because most debt settlement lawyers operate nationally they do not represent their clients if legal action is taken by the creditor. Just having a lawyer’s name on their company DOES NOT mean you have secured legal representation.
4. Debt settlement lawyers tend to be much more expensive than other alternatives because they may take a percentage of your savings in addition to other fees. For example, assume you have $30,000 in credit card debt and you decide to hire a debt settlement lawyer to negotiate your accounts. You are entered into a 36 month program and the fees immediately start piling up. He or she charges 5% of the amount that is owed up front as a retainer fee and a monthly maintenance fee of $50 for the length of the program. This is fairly standard, but the lawyer may also be entitled to 30% of the savings. If your debt is settled for 40% of the outstanding balance, your total fees will be $8700 if your debt. You will be much better off than paying the minimums on high interest credit cards, but there are more economical options available that will deliver equally satisfactory results.
5. The accounts probably will not be negotiated by an attorney. In most cases these are traditional debt settlement companies operating under the auspices of a law firm in order lend themselves credibility. Virtually every debt settlement law firm will move the client’s account to a backend company for negotiations. If they do retain the account, there may be just a few lawyers working for hundreds or even thousands of clients. In light of the fact that they often charge higher fees, many consumers feel it doesn’t make sense to pay higher prices when they can receive the same level of expertise with a more cost-effective alternative.
6. By using a debt settlement law firm, clients often end up with fewer protections rather than more. Debt settlement companies are subject to a number of different regulations depending on where they are based or where they are doing business. By operating as a law firm in the “professional services” realm, many of these regulations do not apply and they are instead governed only by the professional and ethical standards of the legal field.

The debt settlement lawyer model only makes sense if the attorney just operates on a local level with fees that are competitive with other companies in the industry and is willing to represent you in court in the event of a lawsuit. Even then, before you consider a debt settlement lawyer, see if they are in good standing with the Better Business Bureau and with the local Bar Association. Ask for the Bar Association number to see if they are operating legally in your state. Just because they passed the Bar does not necessarily mean they have a good reputation for helping their clients.

This site will not review attorneys or any legal model as each State’s Bar governs the behaviors of attorneys in their state.

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