Do I Need a Debt Lawyer?

A debt attorney has experience navigating through the legal system, making it more likely that you will be successful overcoming any legal obstacles you might face because of looming debt. A debt lawyer can help you determine the best route for you to work through your debt issues.

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A debt lawyer is someone with the knowledge, credentials and skill to help consumers struggling with debt sort through their financial troubles. Representing clients in cases against debt collectors is a form of consumer law, the branch dedicated to protecting consumers against unfair trade and credit practices. Debt lawyer negotiate deals with creditors, handle lawsuits from credit card companies and other lenders and, when a client’s finances are beyond repair, file for bankruptcy.

Debt lawyers have become more prominent because household debt in the U.S. has jumped 11% over the last decade to an average of $134,643  (including mortgages) and credit card and auto loan debt are going over the $1 trillion, mark. With so much money owed, debt collection agencies are getting more and more aggressive in trying to collect. The Consumer Financial Protection Bureau says there are more than 6,000 debt collection agencies in the U.S. and their revenue for 2016 was more than $12.2 billion.

The CFPB says 70 million consumers were contacted by debt collection agencies in 2016 and about 17.5 million of them felt threatened by the call. Those people are seeking help from debt lawyers to fight back against aggressive debt collectors in court. If a debt collector is relentless in trying to recover money you owe, a debt lawyer is a good resource to help you understand your rights and provide a path to escape harassment or illegal tactics.

Can a Debt Lawyer Help My Court Case?

A debt lawyer is extremely valuable if your debt situation causes you to go to court. Debt collectors can take consumers to court to recover money owed and win most of the cases because the consumer never appears in court or sends a legal representative.

Consumers who do appear in court with no legal representation are doing themselves a disservice. They often don’t know their rights in these cases and thus don’t represent themselves effectively.

With a debt lawyer, a consumer involved in a court case with a debt collector should be treated with more respect inside the courtroom and will have someone with expertise by their side. The debt lawyer can make compelling arguments to the judge in their favor.

Also, a debt lawyer can determine quickly whether any illegal methods are being used by debt collectors to recover money. This is especially useful if you have experienced harassment or threats from debt collectors. A debt lawyer will help you prepare a lawsuit against a debt collector who has broken laws that range from illegal contact to false or threatening statements.

What Can a Debt Lawyer Do for Me if I File for Bankruptcy?

A debt lawyer is almost mandatory when filing for bankruptcy.A debt lawyer who specializes in bankruptcy can explain the differences between Chapter 7 or Chapter 13 bankruptcy filings and should advise you what rights and obligations go with each form.

With a bankruptcy, a debt attorney will help you prepare all the required paperwork you need in your case. They can answer your questions and give you a basic rundown on rules and procedures in the courtroom.

How Much Does It Cost to Hire a Debt Lawyer?

When you are swamped with debt, hiring a lawyer can add to the pile of expenses you already have. The right lawyer, however, can steer you though the legal system, and put you on the right financial track.

Many law firms provide free debt consultations. It is best to set up an in-person visit. When you decide on a lawyer, get a list of all charges and fees in writing so you know what to expect to pay. In a debt settlement, a lawyer may have contingency fees, which means the lawyer receives a percentage of money you recover.

A debt lawyer can charge an overall flat fee for a straightforward process like a simple bankruptcy. A debt lawyer can also charge by the hour, with the rates varying based on the lawyer’s experience level and knowledge of debt.

If the lawyer charges per hour, get a written estimate of the amount of time that the lawyer will need to complete the services.

In the end, you need to weigh the potential short-term cost of the attorney with the potential long-term cost of losing in court or losing out of court to a collection agency.

When You Should Hire a Lawyer

The first step to solving problems with debt collection is to see if you can deal with the situation yourself, or contact a nonprofit credit counseling service to assist you. The nonprofit agencies will cover over your expenses and income and offer advice on what the best solution is for your situation.

However, if your debt problems have grown severe or you’re being threatened with legal action, it might be time to find an attorney. The cost of legal help might not make financial sense in some circumstances. Finding a lawyer who is willing to review your situation in a preliminary meeting without charging might be a good idea if you’re not sure.

Here are some common reasons to seek legal advice:

  • Debt collectors are calling you at home or work all the time. If you’re getting a lot of calls and can’t stop them with a request that the debt collectors desist, it might be time to bring in an attorney who can discuss your rights and speak to the creditors contacting you.
  • You’ve reviewed your finances with the help of a nonprofit debt counselor and have concluded that you are unable to repay your loans.
  • A creditor is threatening you with a lawsuit or has filed suit.
  • Debt collectors are treating you in a way that you feel is abusive.
  • Your creditor has repossessed your car and might be threatening you with a collection suit.

Is Hiring an Attorney Worth It?

Lawyers cost money, so it is wise to consider whether retaining one in a debt case is worth the cost. Face it, you already have financial problems, so unless you have a potentially winning case, spending more money on a lawyer might be a waste of your very limited resources.

If you’ve been sued by a creditor, you could defend yourself or you could hire an attorney. If you don’t do either – and that is what happens in most cases – the creditor obtain a legal judgment against you and can pursue that until you finish paying it.

Before deciding whether to hire a lawyer, defend yourself or let the creditor collect on a judgment, review the situation. If you owe what the creditor claims you owe and the creditor has legal standing to collect, there might be nothing to do. A lawyer in this case can do little to help you.

Perhaps you have grounds for a counterclaim against the creditor. If the creditor violated legally prescribed procedures for collecting debt – say the creditor illegally harassed you – a lawyer might be able to file a counterclaim against the creditor.

There are also standard legal defenses that could work. If there was a statute of limitation on the amount of time the creditor could collect the debt and that time has expired, the creditor has no legal standing and the court will rule in your favor. Other times, creditors file the case in the wrong court or don’t have the legally required paperwork to bring suit. Again, a defense is in order.

But before you decide to file a counterclaim or mount a defense, consider the costs. Is your debt large enough to justify the time and legal costs that would be necessary to win? If you fight back and the creditor wins, a judge could assess legal costs against you, adding to your debt. So bring a cool head to the issue before you decide what to do.

Finally, know the law as it pertains to your case. If the creditor prevails, can it seize your wages or your bank accounts? If not, you might be judgment proof and it might not make sense paying a lawyer to defend you.

What to Expect from a Lawyer

Lawyers can be expensive, so if you decide to hire one, you should talk fees early on. Lawyers will either charge you an hourly rate or a contingency fee, which is a percentage of what you might win in a lawsuit. In some instances, they might also ask for a flat fee, but this is usually for simple cases, Most of the time, if you’re the defendant in a debt case, you are unlikely to collect anything if you win, so most lawyers wouldn’t take you case on a contingency basis.

Before you retain an attorney, get an idea for how your case will be handled and how much time it might take to resolve. Also ask the lawyer how solid your case is – if you only have a small chance of prevailing, the cost of mounting a legal defense might not make sense.

An attorney might be worth the cost if you have a sizeable debt issue, grounds for defending yourself or countersuing and don’t feel comfortable handling the legal work yourself.

Steps You Should Take

Before you take steps to defend yourself in a collection case, be prepared and understand what to expect. Hiring a lawyer might be part of the process, especially if you’ve been sued or suspect a suit is coming. But you can also seek advice form a debt counselor if a lawsuit isn’t in plain view. Here are a few things to do:

  • Gather all paperwork related to your debts. If you’re contacted by creditors or collectors, keep a log of the contacts, including time and date of phone calls. Keep all mail and email that you might receive. It might not all be relevant, but it’s a good idea to thoroughly document anything related to the debt collection process.
  • Contact an attorney to go over you case. You might not think you have grounds to defend yourself, but an attorney familiar with collection and debt might see something you missed. Get referrals from friends and family members. You can also go to the National Association of Consumer Attorneys website for advice and referrals.
  • Let the attorney you’re interviewing ask questions. Many successful debt-defense cases stem from violations of consumer protection laws, and the attorney will ask you questions that might suggest a defense strategy. Good recordkeeping can help you answer these questions.

Pick the Right Lawyer

In addition to finding a lawyer through personal referrals and non-profit debt counseling agencies, do some research yourself. Check the attorney’s history using online searches and government sources. Make sure the lawyer has a license in good standing. During a preliminary, in-person meeting, think about whether the lawyer and you mesh well, and ask candid questions about the lawyer’s background in debt collection litigation.

Be careful who you choose. Sometime debt settlement companies lure clients in through advertising, but don’t offer legal services. In other instances, debt settlors use lawyers as fronts to draw business. Then the lawyers disappear and you’re dealing with a debt settlor who might not offer the kind of help you were seeking.

Make sure you’re dealing with a lawyer if you need legal help.

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Author

Bill Fay
Staff Writer

Bill Fay is a journalism veteran with a nearly four-decade career in reporting and writing for daily newspapers, magazines and public officials. His focus at Debt.org is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at bfay@debt.org.

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