The Process of Debt Collection and When You Need to Hire a Lawyer

Most of us are in debt one way or another, regardless of how much money we have in the bank. Condoned debt is simply called a loan, where you remain in debt and enjoy benefits such as increased credit score so long as you make consistent repayments. Fall behind on those repayments however, and that is when trouble arises.

Even if you fall into arrears, there are plenty of options available. You can consolidate your debt to make repayments simpler and easier. You can make a deal with your creditor to pay only a portion of your debt back for the matter to be settled, and you can even file for bankruptcy.

Knowing what the process of debt collection is and when you should look into hiring a lawyer is going to help keep you out of jail and is critically important.

The Process of Debt Collection

Debt collection occurs in a few steps:

  1. Reminders are sent out
  2. Legal action is threatened
  3. Debt collectors are brought in
  4. Your debt is sold to a debt buyer

Escalation Options

If your debts continue to progress unpaid, then creditors can even come after your wages directly. Owing back tax to the government or being behind on student loan repayments could result in this. This is known as having your wages garnished, and though the creditors might be getting their money, you won’t have anything to live off.

Other options include legal action like lawsuits, and in some extreme cases you might even be sentenced to prison.

When You Need to Hire a Debt Settlement Lawyer

You need to hire a debt settlement lawyer to handle your case, rather than just try to handle it yourself, if:

1.    You Have a Significant Amount of Debt

Small debts are relatively easy to settle because even if you only provide half of what you owe in a debt settlement, the creditor often walks away happy. This usually only happens if your debt is 1000 dollars or so, and you can offer to pay your remaining 500 dollars to settle your debt.

If you are in debt for tens of thousands or hundreds of thousands of dollars, then you will need a debt settlement lawyer.

2.    You Have Been Issued a Lawsuit Over Your Debt

Being issued a lawsuit over your debt is a very serious issue, which is why you will want to seek out legal advice to help protect from a lawsuit over debt as soon as possible, and hire a lawyer to represent you.

If you do not have a lawyer on your side that specializes in debt lawsuit, you could end up in a worst-case situation. This is because the prosecutor and their legal team will use the full extent of the law against you in order to win.

3.    You Need to File for Bankruptcy

Filing for bankruptcy is a big step, and it could solve debt issues should you have no way to pay back all of what you owe. If you do intend to file for bankruptcy or are at the very least thinking about it, then you will need to hire a lawyer to handle your case.

Hiring a lawyer before you make any big decisions is important, because though filing for bankruptcy might seem like the best way to make all your problems disappear, the consequences can often be dire.

Your credit will be destroyed for years depending on which filing you opt for. A Chapter 13 filing will result in your bankruptcy remaining on your record for seven years. A Chapter 7 filing will result in 10 years.

Future borrowing will either be impossible or incredibly expensive, meaning that you will have a very difficult time regaining assets and building up a healthy retirement fund.

By hiring a lawyer, he or she can go through your options and negotiate with your creditor to find a way that keeps your credit intact. This way, you can borrow in the future to buy that next car, or perhaps more homes.

Debt Recovery

Regardless of whether you file for bankruptcy or not, you will need to invest in debt recovery after your debts are settled. This could be done by consolidating your loans to settle your debts with your creditors in exchange of one lender. You could also settle each debt you have individually and then work to improve your credit, with things like credit building loans or special credit-building credit cards.