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Everything That You Should Know About Debt Relief Lawyers before Hiring Them

According to a report ( published by the Bureau of Consumer Financial Protection in December 2017, applications for new credit cards have surged by more than 50% since 2010. Credit card debt has also increased by 9% in the last couple of years; however, not unsurprisingly, cardholders with poor credit scores have increased their average balances much faster. Those with deep subprime scores are reported to have shown an increase of 26% in their average card debt over the last two years.

For many customers, the monthly debt is so high that they can’t keep up with the monthly payments and as a result, end up jeopardizing secured assets like the home and the car. Under these circumstances, many people undertake various kinds of debt relief; some try to do it by themselves while others take the help of lawyers. Hiring a lawyer should be a considered decision; you need to know what they can achieve, how they function, and how much they could cost before signing on the dotted line.

What Do Debt Relief Lawyers Do?

The scope of involvement of a debt relief lawyer is dictated by the sort of help required by the customer in resolving his financial mess. If the debt repayment can be sorted out through financial discipline, debt consolidation may very well be the most painless way. If the extent of unpaid debt is quite substantial and the customer is in dire financial circumstances due to reasons like loss of employment, sudden medical expenses, death in the family, divorce or disruption due to a natural calamity, a lawyer can be engaged to settle the debt.

Debt settlement is a process by which the card companies agree to forgive the accumulated interest and even reduce the principal due so that the customer is able to repay them instead of filing for bankruptcy. Typically, the negotiations are tough and protracted because the card company will only agree to a settlement if they understand that it is the only way that they will be able to recover a part of their money. If the extent of debt is more serious, the lawyer will assist the customer to file for bankruptcy under either Chapter 13 or Chapter 7 of the U.S. Bankruptcy Code. Click here to know more about debt relief.

Decide Between Chapter 7 and Chapter 13 Filing

If the lawyer advises that bankruptcy is the only viable solution for resolving the debt situation, you will have to decide whether to file the petition under Chapter 7 or Chapter 13. A Chapter 7 bankruptcy results in your debt being completely eliminated, however, you may lose all your assets if they are ordered to be liquidated by the trustee to pay off your creditors. Under a Chapter 13 bankruptcy, your repayment ability will be judged and the court will set up a repayment plan that you can afford according to which, your creditors will be paid off over a period of time. Depending on the circumstances, your debt may be reduced substantially but you will still be required to pay a portion back. The advantage is that you are allowed to retain possession of your assets like your home and your car.

Bankruptcy Does Not Ensure a Clean Slate

While debt relief lawyers can present your case in such a way that you are given the maximum benefit of debt reduction, you need to understand that all your debt will not be wiped clean. According to the National Association of Consumer Bankruptcy Attorneys, customers should understand that even Chapter 7 bankruptcy does not result in the elimination of student loans, alimony debt, debt obtained through fraud or debt owed to the tax authorities.

Lawyers Cannot Save Your Credit Score from Being Negatively Impacted

Regardless of whether you have gone in for debt settlement or bankruptcy, you can be sure that your credit score will take a major hit. In the case of debt settlement, the negative impact will stay on your credit report for seven years and in case of bankruptcy, for as long as ten years. Even though your lawyer may not make it specifically clear to you, you can expect your credit score to plunge by around 100 points or more in case you are declared bankrupt. This may make taking on loans or new credit cards in the future very difficult as a healthy credit score is a prerequisite for all lenders. The interest rate that will be quoted for people with poor credit scores will be far more to compensate for the additional risk of default. By making your monthly repayments on time and ensuring that you do not default on any loan or credit card payment, you can gradually improve your credit score.

Cost of Legal Assistance May Be Steep

The cost of hiring an attorney can vary a lot depending on what the task is and what the customer’s financial circumstances are. It is not necessary for you to engage a lawyer for the entire settlement or bankruptcy procedure; you can simply engage a lawyer for a specific task like drafting an application or an agreement and handle the rest on your own. Performing an unbundled service, as it is known, entails a fixed fee and typically, has no relation to the amount of debt that you have.

If you are engaging an attorney to handle the debt settlement of a bankruptcy filing, you should first discuss the basis of his charges. There are attorneys that charge a flat fee while others charge an hourly rate or a fee based on either how much debt you owe or the amount the settlement saves. A higher fee may be charged if the case is complicated by litigation or a court judgment against you.


Debt relief can be confusing, especially if you are not used to it. You should try and understand what it entails before you start negotiating with a creditor or hire an attorney. When engaging a lawyer, you should be very careful in understanding what his involvement is going to be and how much it will cost you so that you will not have to abandon the proceedings for lack of money.