Should I Use a Lawyer to Negotiate With Creditors?

Before you hire a lawyer to negotiate with your creditors, consider the pros and cons.

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If you are wondering whether you should hire a lawyer to negotiate with a creditor, consider the pros and cons. While there are numerous factors to weigh, the defining consideration for virtually all aspects of this decision is usually money – your money, the money you’ll pay to the lawyer, and the money going to, or not going to, the creditor.

Read on to learn the advantages and disadvantages of using a lawyer to help you bargain with a creditor.

(Find more articles about negotiating with creditors.)

Advantages of Using a Lawyer

Hiring a lawyer to assist you in negotiating with a creditor allows you to take advantage of the lawyer’s legal knowledge and experience dealing with creditors, and can also save you time.

Knowledge of the Law. A lawyer well-versed in debt relief and creditor rights will be familiar with laws that govern how and when a creditor may collect on a debt, and procedures (such as certain notice requirements) the creditor must comply with when collecting a debt. If a creditor violates the law, these laws also provide you with various remedies. A competent lawyer can ensure that creditors abide by the law, or can help you seek redress if the creditor violates the law.

Experience Dealing With Creditors. A lawyer who has experience negotiating settlements with creditors may be able to predict some likely outcomes, given your particular situation. This may include settlement for a reduced lump sum, a payment plan over time, or even the creditor’s refusal to negotiate. However, because creditors generally handle negotiations on a case-by-case basis, it will be difficult for the lawyer to nail down exactly what to expect in terms of a settlement.

Time is Money. Hiring a lawyer to handle negotiations with a creditor also means that you don’t have to spend time on the phone, preparing documents, or going to court proceedings.

Disadvantages of Using a Lawyer

Here are some of the downsides to using an attorney to negotiate with a creditor.

Lawyers Can Be Expensive. Unless you are able to obtain help from a legal aid or nonprofit service, hiring a lawyer will cost money. You don’t want the lawyer’s fees to approach the total amount of debt you are trying to settle. Most lawyers will offer you different payment options such as a lump sum retainer that you periodically replenish or a pay-as-you-go plan.

Lack of Control. When you hire a lawyer to handle a matter for you, you relinquish some degree of control over the matter. Although there are certain decisions where the lawyer must get your authorization, the lawyer has wide discretion when it comes to most aspects of the negotiation. A competent, experienced lawyer will listen to your concern and then adjust the negotiation strategy accordingly. While this is partly what you’re paying the lawyer for, it can be frustrating at times because you may believe the lawyer should take a different approach. Ultimately, you make the final decision of whether to accept or reject a settlement offer.

Lapses in Communication. One frequent complaint about lawyers is lack of communication. Some people feel that their lawyer doesn’t respond promptly to calls or emails. Some may even contact the state bar to report an unresponsive lawyer. In this case the bar will contact the lawyer and threaten disciplinary action if the lawyer does not maintain a reasonable level of communication with the client. To avoid this problem, choose your lawyer carefully. (To learn how, see the articles in Working With a Lawyer.)

Results Are Not Guaranteed. A lawyer cannot guarantee results. If the lawyer does not obtain a favorable outcome or fails entirely, you are still liable for the debt. This means that you could pay your lawyer’s fees and end up in a financial situation that is worse than when you started. On the other hand, if the negotiations are successful, you may pay the lawyer and walk away from the debt entirely.

Updated by: , J.D.

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