College Park, MD asked in Bankruptcy for Maryland

Q: I have $45000 in debt, a "debt resolution" lawyer is telling me to enroll on their program. Their fee is $500 per month

I have $45000 in debt, a "debt resolution" lawyer is telling me to enroll on their program. Their fee is $500 per month for 36 months for a total of $18000. He said once the program is completed Ill be debt free. Im very skeptical of how would I be debt free if I am only paying their fees?

Is not even a settlement, because the money I pay them is only for their fees. They said that the debt is already written off to the IRS but the creditors still want to collect the debt for me, so by hiring them, they will look for any mistakes that the debt collector makes and when they find the mistakes they will make them remove the debt. So the creditors will not get paid or settled at all.

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2 Lawyer Answers
W. J. Winterstein Jr.
W. J. Winterstein Jr.
  • Bankruptcy Lawyer
  • Boyertown, PA

A: Several of my bankruptcy clients have used such "debt resolution" services before engaging me, and none have good things to say about them or their effectiveness.

A bankruptcy case, filed in a real court, is the only path to a legally enforceable discharge of debt. Anything short of that depends entirely upon what creditors may decide to do with your debt. Many will opt to take a judgment, to create a lien to secure their claims. Even in a bankruptcy case, liens are protected against discharge to the extent of any equity value in your assets.

A bankruptcy lawyer is almost certainly going to charge you far less than the "fee" to your debt resolution" service.

1 user found this answer helpful

Ashley Morgan
Ashley Morgan
  • Bankruptcy Lawyer
  • Herndon, VA

A: Debt settlement programs can work, but the problems happen when they do not (and unfortunately is often that the programs do not work). The payments you made are based on what the debt settlement company expects the creditor to accept. If the creditor wants more than they or refuses to settle, then you have the issue that there is then not enough money to go around and you may have to pay in more. The reason this is a problem is that debt settlement is controlled by what the creditor agrees to. If no agreement is made, then the creditor is likely will sue you in court.

As for challenging debts and what was done wrong on the account, it is hard to do. Debt collectors are smart and follow the rules. Unless you have older debts that can be barred by the statute of limitations, it is often hard to get a creditor to back off or find a mistake that is worth them not collecting at all.

Many people who attempt debt settlement end up having to file bankruptcy because the program does not work. I often encourage people to at least consult a bankruptcy lawyer before signing up for a debt settlement program to get an understanding of all your options. Many of our clients end up paying less to creditors (often nothing in a Chapter 7) and the attorney fees in a bankruptcy are often substantially less. Credit rebuilding also starts immediately after bankruptcy is over vs. in debt settlement it doesn't happen until all your accounts have been handled.

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