Should I Use A Debt Negotiation Agency?

I think it’s easy to see why people use debt negotiation agencies. If given a choice most of us will opt for the easier softer way. Late at night stressed out over the family debt situation, it’s just easier to phone a debt settlement company and talk to one of their phone reps rather than make an appointment to see a bankruptcy attorney.

I get it. Seeing a lawyer and potentially committing to a legal process that will result in you having to go to a hearing, even an informal one, doesn’t lower your stress level. In the short run, it probably makes it worse. Unfortunately, while calling the debt negotiation agency will probably help you get to sleep that first night you call it, in the long run, it will likely produce ten times more stress than a bankruptcy ever will.

How do I know this? In addition to managing my firm’s Phoenix-area bankruptcy practice, I am often hired by debt negotiation companies to help their clients after they get sued. In fact, I have been brought in on about eight of these cases in the last month or so after the debt negotiation company failed to get all of the creditors on board. It’s a pretty common occurrence.

The problem is that many of these companies are unable to get all the creditors on board in the beginning. The client starts making payments but and the debt negotiation agency starts distributing money, but six months later one of the creditors that didn’t sign on at the outset and, as a result, has been receiving nothing for months inevitably sues the client who has no real money to settle the matter.

So the credit isn’t getting any better, the client is out of pocket for every dime that they could afford every money and the litigation has now started. Compare this state of affairs to the bankruptcy filer who has by now either completely eliminated all debts or is participating in a monthly payment plan where they are likely paying back less than the person who entered into debt negotiation. Remember that the bankruptcy filer is, in any event, making one payment to satisfy all creditors without running any risk that a creditor might later opt out.

All of this begs the question is there any reason why someone should opt for a debt renegotiation company rather than a bankruptcy firm. Truth be told I can think of one situation where using a debt renegotiation company is the better move.

Lets say that due to your income or assets you don’t qualify for Chapter 7 bankruptcy, you have debt problems but you know that your ship is coming in. Maybe you are about to inherit a large sum of money, or a family member is going hand you all the money you need to settle your debts. If what you need is really temporary help, a bandaid really, for maybe a six month period, a debt negotiation might be the best move. Even if this is the case, I would strongly advise meeting with a qualified bankruptcy attorney. Even under these circumstances, you may do better financially by filing bankruptcy.

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Please set an appointment at Phoenix Fresh Start Bankruptcy Attorneys if you have any questions about debt renegotiation and bankruptcy.