4 Times When You Should Hire a Debt Settlement Lawyer

Settling debt on your own doesn't always work. Here's when to call in the big guns. Image source: Getty Images.

Many of us wind up deep in debt for one reason or another. In some cases, it's because we're too liberal with our credit cards. Other times, it's due to circumstances we can't control, like emergency home repairs or medical bills.

If you're grappling with loads of debt to the point where you can't see yourself paying it off, your best bet may be to enlist the help of a debt settlement attorney. Of course, the primary downside of going this route is the cost involved. Debt settlement lawyers can command a small fortune for their services, whether they work on contingency (meaning they take a cut of the debt savings they negotiate for you) or charge a specific hourly or per-case rate. The plus side of hiring a debt settlement lawyer, however, is getting an expert in your corner who can fend off creditors and potentially succeed in wiping out some of your outstanding obligations.

Now let's be clear: You don't need an attorney to negotiate with creditors. You can try to work out arrangements yourself. Whether you'll succeed is another story.

If you're looking for outside help in dealing with your debt, you can also enlist the help of a debt settlement company, which might charge less than a lawyer would. The benefit of using an attorney, however, is having someone who not only is experienced in debt settlement, but may know how to help you minimize your legal risks. With all of that in mind, here are a few scenarios in which hiring a debt settlement lawyer could make sense.

1. Your debt is substantial

If you owe a manageable amount of money, it often pays to go straight to your creditors and try negotiating either a settlement or a repayment plan. For example, if you owe a creditor $2,000 and offer up a $1,000 payment to settle that debt, that creditor might agree to such an arrangement, as it won't be losing a huge amount of money.

But if you're sitting on $20,000 in debt, that's a different story, and you may want to hire a lawyer to talk that number down.

2. Your wages are at risk of being garnished

In some cases, your creditors can come after your earnings if your debt goes unpaid for too long. For example, if you owe the IRS back taxes, or if you're delinquent on your loans, you could be at risk of having your wages garnished, compounding your financial troubles. If that's the situation you're facing, then it might pay to hire an attorney to step in.

3. You're actually being sued by a creditor

Just as consumers have legal protections, so do creditors who are owed money, which means that in some cases, your creditors may have the right to initiate a lawsuit against you. At that point, bringing an attorney on board often makes sense, especially if there's a chance a serious judgement will be issued against you.

4. You're thinking of filing for bankruptcy

If your debt has escalated to the point where you're thinking of filing for bankruptcy, then it's a good idea to see if a debt settlement lawyer can help you avoid that fate. While filing for bankruptcy might seem like an easy solution to an otherwise daunting problem, it's no picnic. Not only is it expensive, but it can stay on your record for seven years in the case of a Chapter 13 filing, or 10 years in the case of Chapter 7. And when you have a bankruptcy filing on your record, borrowing can be prohibitively expensive, if not downright impossible. A debt settlement attorney might help you avoid that fate, thereby keeping your credit record reasonably intact.

There are certainly pros and cons to hiring a debt settlement lawyer. If you're really not sure whether you need one, see if any local attorneys offer free consultations (many do), sit down with a few, and hear what they have to say. It's a worthwhile step to take if it brings you closer to working your way out of the hole you've landed in.