A debt settlement law firm is expected to help consumers build up a lump sum of cash in order to negotiate debts be settled at once, and the unpaid debt forgiven. Using a debt settlement law firm, or even a solo attorney is the safest way to work out a debt settlement plan. Because their are complex laws involved, potential creditor lawsuits, wage garnishment and other creditor backlash, having an attorney handle a debt settlement plan is far safer than using a debt settlement company.
Debt settlement is essentially a tactic for negotiating down debts with a creditor, in an effort to get the liability removed in return for some portion of the money owed, paid in a lump sum.
The first step in debt settlement involved not paying the monthly bill. You read that right. In order to work out a debt settlement agreement, the debtor almost always has to be in default, otherwise, the creditor wouldn't bother.
A debt settlement attorney will set up an interest bearing trust fund into which the debtor pay monthly payments. These are the payments that otherwise would go to the creditor.
One of the most critical parts a debt settlement lawyer will play is to protect the debtor during the lump sum generation portion of a debt settlement plan. While it's critical to build up at least 30% of the money owed, this can take many months, and creditors will only wait so long before filing a lawsuit.
The debt settlement attorney handling the case must delay and defend these suits long enough to build up the case to settle the debt owed.
One enough cash has been raised, the attorney will go to the creditors with a lump sum cash offer to settle the debt liability. Often times, a creditor will accept somewhere between 30-40% of the money owed to settle the debt and forgive the remaining balance.
There are many debt settlement companies out there that advertise heavily and claim to be able to settle your debts for a fraction of what you owe. What they don't tell you is that they often charge many thousands of dollars for this service, and you will probably never talk to an attorney.
These companies will claim to be a "law firm", but in reality, a company with hundreds of employee may have one attorney. They do this because by law, only an attorney can offer these types of debt settlement services due to the legal issues involved. Always talk directly to a debt settlement attorney about your case, and make sure your legal rights are protected.