How Much Can You Usually Settle a Debt For?
It’s very difficult to say, since these matters are so fact specific. Generally, debt negotiation reduces a UPB (unpaid principal balance) between 10 and 50 percent. Clear evidence of lender fault, like lender fraud, generally means a large reduction. Mere inability to pay generally means a smaller reduction. The bankruptcy bluff, which is outlined below, often comes into play as well.
Usually, bankruptcy is the best way for distressed debtors to obtain financial relief. Bankruptcy gets rid of crippling credit card and other unsecured debt. Bankruptcy also gives distressed debtors an opportunity to take care of delinquent secured debts, like past-due mortgage payments, on their own terms. However, bankruptcy is a radical solution, and a good Chicago debt relief lawyer always tries the easy way first. The easy way could very well be non-bankruptcy debt reduction negotiations.
The Bankruptcy Bluff
People who file bankruptcy get certain legal protections. For example, bankruptcy’s Automatic Stay prevents repossessions, foreclosures, and most other creditor adverse actions. Bankruptcy also shields retirement accounts and exempts other assets.
However, if you plan to make a major purchase, like a house, within the next twelve to eighteen months, bankruptcy might be a bad idea. Most debtors quickly rebuild their credit scores after they file, but the process usually isn’t that fast.
Furthermore, not everyone qualifies for bankruptcy. Chapter 7 filers must pass the means test. Their household incomes must be lower than the statewide average. Chapter 13 filers must be below certain debt ceilings. These requirements usually aren’t a problem, but every case is different.
When a Chicago debt relief lawyer begins negotiations with a creditor, a lawyer has a critical advantage. The lawyer may know that the debtor doesn’t want to file bankruptcy or doesn’t qualify for bankruptcy. But the creditor doesn’t know that. So, a filing threat is effective. Creditors know that if they don’t make favorable deals and the debtor files bankruptcy, they get essentially nothing.
Debt Negotiation Services vs. Attorney Negotiations
Many debt relief companies don’t negotiate with creditors at all. Instead, they have pre arranged deals with certain creditors who agree, in advance, to reduce UPBs by a certain percentage. They don’t deviate from these percentages under any circumstances.
Attorney-negotiated settlements are tailed to that particular debtor and creditor. The bankruptcy bluff is just one available bargaining chip. Lender fraud, which was mentioned above, is another one. For example, many mortgage companies convince people to sign forms they barely understand and buy homes they can barely afford. This practice might not be illegal, but mortgage companies certainly don’t want people to know about them.
Only an attorney can threaten to file bankruptcy or file a civil action on behalf of a distressed debtor.
UPB reduction isn’t the only available relief. In fact, it’s not even the most common kind. Many lenders readily agree to interest rate redactions and late payment forgiveness. These accommodations are usually worth much more than a slight UPB reduction.
Count on a Diligent Cook County Lawyer
No matter what kind of financial problem you are having, there’s usually a way out. For a free consultation with an experienced debt reduction attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. The sooner you reach out to us, the sooner we start fighting for you.