Question:

Should I Use an Attorney to Negotiate a Debt Reduction Plan As an Alternative to Bankruptcy?

Using An Attorney To Negotiate A Debt Reduction Plan

Depending on your situation, using a bankruptcy lawyer to work out a debt reduction or settlement agreement might be the perfect solution or the wrong option. There are two issues that dictate which choice might be best for you:

  • What is your debt to income situation? Are you too deeply in debt to offer a simple and reasonable plan of action to your lenders?
    Is your situation so bleak that you cannot propose a resolution in a reasonable time frame? Or is your current situation both temporary and resolvable in the foreseeable future? If so you may be better working out an arrangement directly with your lenders. It is cheaper, faster, simple, and sometimes more effective. On the other hand, if your current situation is complicated, your prospect for future income cloudy, or you face issues that presently are outside of your control, you might be better served by allowing a bankruptcy attorney to
    negotiate an arrangement.

  • Should you choose to use legal counsel, your choice of an attorney is critical. Only consider lawyers who have experience and expertise in this area. They have had these discussions with many lenders for many clients of varying income and debt situations. They have a professional “feel” for the best terms your lenders are willing to offer. Any thoughts of using your brother-in-law, who is a real estate attorney, or your golf buddy, who is a criminal lawyer, must be
    dismissed immediately. Using a lawyer unfamiliar with these situations often generates one or both of the following:

  1. Your lenders may become annoyed that, without talking to them openly about your situation, you retained inexperienced legal counsel to work out a deal in your favor; or
  2. Your lawyer, inexperienced in these matters, may not make the best arrangement you could have obtained from your lenders.

Also, always remember that, unless your brother-in-law is also an experienced bankruptcy attorney, you will incur a substantial cost should you choose to use a lawyer to negotiate your prospective
agreements. Certainly there are situations where the cost is minimal compared to the severity of your situation and the level of the debt arrangement that might be made. But if you are simply over extended for the short term, desire some immediate relief and see your debt-to-income situation improving in the near future, you may incur legal costs that you will regret later.

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