A Statement Of Cash Flows And Its Related Disclosure Debt Settlement Attorney – Do You Really Need One? Find Out The Truth!

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Debt Settlement Attorney – Do You Really Need One? Find Out The Truth!

I have been in the credit card debt relief industry for over a decade now and have seen many changes; Some changes benefit customers and some don’t. In this article I will discuss the validity, or lack thereof, of the “debt settlement law firm” approach to getting out of debt. Many recent changes in the debt settlement industry have left consumers very confused; This article will open your eyes to the truth in this matter. This is going to be a long and informative article with a fair warning up front, so if you are not genuinely serious about finding a solid solution to your debt problem, stop reading now.

Recent FTC Changes

On October 27, 2010, some major changes made by the FTC (Federal Trade Commission) turned the debt settlement industry upside down. This enforcement by the FTC will change the way debt settlement companies do business forever; And they are actually beneficial to consumers who understand them properly.

It underwent two major changes, the first was the ban on advance fees and the second was full disclosure; Both are very important topics to understand.

Let’s first examine the advance fee ban so you have a better understanding of why it was implemented and what happened to the industry as a whole. The FTC stepped in to crack down on the settlement industry after years of complaints from consumers about fraud and scams. Many companies were run by people who put their own pockets first, not borrowers who needed help.

What attracts many professionals to the debt settlement industry is the ability to make quick money with very little work. Prior to the FTC changes, companies were allowed to charge their entire settlement fee before contacting the creditor to negotiate a settlement. Needless to say, this caused a lot of problems, and countless unsuspecting customers were already paying huge fees for the company to never get the job done; That left them in a much worse situation than they already were.

After years of fielding complaints the FTC finally came down and made it illegal for debt settlement companies to charge fees before they settle. This is good news for consumers, greatly reducing the risk of entering a debt settlement program; At least where losing upfront fees is concerned.

However this was dire news for most companies in the industry; But this is really good news for legal and business savvy companies. All this was bad for “scammer” operations; No longer could they cheat people, now they had to earn their money by negotiating better settlements for their clients. Almost overnight you saw more than 90% of companies exiting the industry. Even some bona fide companies folded because they didn’t have enough operating cash flow to keep the business going without incurring fees.

This was good news for honest, sound companies in the industry, because:

a) Now the industry has legal teeth (FTC regulations) to rid the industry of bottom-feeding “scam” companies.

b) That means less competition for them; Letting them focus on what they do best, saving people money and getting them out of debt faster.

Another major enforcement on behalf of the FTC was “full disclosure.” Full disclosure means that a debt settlement company representative must:

a) Explain all debt relief options available to customers, not just debt settlement.

b) Fully disclose both the pros and cons of the debt settlement process.

The problem was that many company sales representatives lied or did not conveniently inform potential clients about the negative aspects of the settlement process such as: potential lawsuits, creditor harassment, negative credit ratings, and creditors not getting paid until settlement (Some companies trick people into thinking they are staying current with their borrowers during a debt settlement program).

So if you’re wondering at this point where I’m going with all this and what it has to do with a “debt settlement attorney”, continue on and you’ll be enlightened.

Law Firm Fee Loopholes and Fraudulent Spins!

In such cases the only way for the debt settlement company to recover a fee for their services is after they have negotiated a settlement on behalf of their client; And that’s how fees should always be collected, and thankfully is now the only way to collect.

However, law firms and lawyers have found a way around this…..at least for the moment. Currently, however, it is legal for a “debt settlement attorney or law firm” to collect their fees before paying off your debt. Note that they are not debt settlement companies so they are not yet affected by the FTC rulings.

Most attorney settlement model programs are very expensive, often charging a percentage of the client’s total debt amount plus a percentage of the amount saved upon settlement; Usually costs more than the settlement company’s fees.

There are a few things you should notice about what a debt settlement law firm is trying to sell you to justify collecting a large upfront fee. First they give you the impression that they can represent you in court if a creditor files a lawsuit against you, and secondly they stop many “claim” calls.

For starters, if you’re being sued by an out-of-state firm with practicing attorneys who can’t defend you, they may refer you to another law firm (whereby you have to pay more legal fees to defend). Second, even if the creditor is in your state, in most cases the law firm will charge you an additional fee to appear in court; The fact that you paid extra legal fees up front means basically nothing.

Additionally, some law firms send letters to your creditors to help stop harassment, but they cannot guarantee that the calls will stop. It’s really as simple as that, one of the downsides of debt settlement is debtor harassment; There is no real way to completely avoid existing.

Now many fraudulent sales representatives are telling gullible customers that their “lawyer settlement program” is the only legitimate approach to debt settlement programs. It can be very confusing to customers, to say the least, which often paralyzes customers with fear of doing anything; Especially if they don’t have the money to pay a law firm.


So what can you do?

This news may leave some people feeling even more lost and unsure of what steps to take to ease their debt woes. Fortunately, I have some solutions that I can present to you.

First is the answer to the litigation problem. The vast majority of people who sign up with a law firm do so because they think they are getting some legal protection; Hence eliminating perhaps the biggest drawback of debt settlement.

The reality is that lawsuits are a possibility; Creditor has right to claim for past due account. The truth is that by far the vast majority of people who go through settlements are not actually prosecuted; Simply because lenders don’t have enough time and money to follow up with all the people who pay. And the fact is that it is often impossible to collect money from some people even if they get justice; As the old saying goes “Blood cannot come from rocks

Also keep in mind that each state has different laws regarding how collectors can sue for credit card debt; Some states, such as Texas, have borrower-friendly laws, while others, such as Georgia, do not. But there is another solution that enables the borrower to take advantage of the FTC regulations without any upfront fees and still have real legal protection that is affordable.

This solution is ‘Debt Settlement Insurance’. Some debt settlement companies may refer you to other organizations that offer insurance coverage programs (not available in all states). These plans are generally very affordable and provide the legal protection necessary to represent you in court to defend you against a lawsuit; The cost of the insurance plan is in the first place without any additional cost.

It truly gives consumers the best of both worlds, therefore offering them an honest way to get rid of credit card debt and limit any legal ramifications; While avoiding filing for bankruptcy.

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