If you are facing debt, you may want help from a debt collection attorney. Learn what they do and how to hire them.
Debt collection attorneys can help you fight debt-collection lawsuits. Their experience can lower the amount you need to pay. You can hire them just like you would hire any other lawyer; just confirm they specialize in helping borrowers like you, not lenders.
Learn more about what debt collection lawyers are and how to go about hiring one.
Debt Collection Lawyer – Everything You Need to Know
A debt collection lawyer is a type of attorney that specializes in helping those with debt. But there is more to know about this type of lawyer than just that. Discover more about collections attorneys.
Collections Attorney – A Basic Definition
The term collections attorney or debt collection lawyer or attorney can refer to lawyers on either side of a debt collection lawsuit. This means that they may represent the borrower who owes the debt or the lender who is owed the debt.
A Refresher on Debt Collection Lawsuits
Debt collection lawsuits can occur if you are overdue on your debt. If you have a loan, credit card bill, or another type of debt that you don't pay on time, you are at risk of a lawsuit.
Most states have a minimum requirement as to how long past due your debt must be before lenders can file a collection lawsuit. But it can typically happen within just a few months.
Lenders Can Sell Debt to Collection Agencies
It is also worth noting that the original lender is not always the one to file the debt collection lawsuit. Many lenders sell debt to collection agencies if they do not think they will be able to collect them easily. The debt collection agency pays the original lender less than the full value of the debt, but they are still entitled to get the full value from you.
This benefits the original lender, as they receive at least some of the money owed them. Collection agencies benefit from the potential to receive the full amount or at least more than they paid to buy the debt.
If your debt is sold, it does not affect the amount you owe. It does, however, affect who you pay for it. This may mean you receive bills from an unfamiliar company, or you see a new collection agency on your credit report.
In practical terms, this means that you should not just ignore papers you receive about a debt if they come from an unfamiliar company. At least take the time to confirm that a debt has not been sold to them.
Is Debt Collection a Legal Action?
Debt collection is completely legal. It is worth noting that debt collection lawsuits are civil suits. This means that you will not face criminal charges.
Collections Attorneys Help You Fight the Debt Collection Suit, But They Don't Offer Guarantees
Remember that collections attorneys can represent either side. Some will only represent borrowers, while some only represent lenders, and others work with either party depending on who hires them.
You should always assume that your lender or creditor will have hired an attorney to represent their side. This will give them an advantage if you do not hire one to represent you.
As expected, your debt collection attorney will do their best to either prevent you from having to pay the debt or minimize the amount you pay. Their goal will likely depend on your situation.
If your debt is legitimate, your attorney may try to reach a settlement with the creditor, so you can pay a reduced amount before the hearing. This would prevent the need to have a hearing at all.
Depending on the situation, they may also suggest letting the matter go before a judge. In this case, they will represent you and demonstrate why you shouldn't have to pay the debt. For example, they may show that you already paid it. Or they may show that the original lender did not deliver the promised goods or services, so you shouldn't have to pay.
Specific Ways Debt Collection Lawyers Help You
There are many things that debt collection lawyers can do to help you fight your debt collection suit, including:
- Keeping track of deadlines, so you never miss one
- Filing the official response to the collection suit, including following all of the legal requirements and best practices
- Reaching a settlement with the lender before the hearing
- Representing you in the hearing
What Happens If You Lose a Debt Collection Suit and Can't Pay?
If you do not attend a hearing for your debt collection lawsuit, you may receive a default judgment. This will typically be in favor of the lender. You may also lose the suit even if you attend the hearing.
But this can be concerning for many people. After all, you likely did not pay the debt because you could not afford to do so.
First of all, the judgment will be on your credit report for up to 10 years.
More importantly, if you lose the judgment, the court can use several strategies to have you pay the lender:
- They may place a lien on your property, such as your car or house.
- They may garnish your wages.
For reference, a lien means that if you sell your house or car, the lender will receive the judgment amount. Only after they are fully paid will you receive the balance of the sale.
Should You Hire a Debt Collection Attorney?
While having a debt collection attorney makes sense in many cases, it is not always essential.
For example, if you know that the creditor is accurate in their assessment of the amount you owe, you may not want to hire an attorney. If you do, you will have to pay the attorney's fees as well as the debt.
However, it can still make sense to hire an attorney in this case. That would be the case if the lawyer could reach a settlement, saving you money.
To decide, consider the amount of debt and compare that to the cost of a lawyer.
You should almost always hire an attorney if you have a counterclaim or defense.
Can I Take Legal Action Debt Collectors?
Yes, if a debt collector engages in unfair, deceptive, or abusive behavior, you can take legal action against them.
Some examples of situations when you can sue include when a debt collector:
- Pretends to be a lawyer
- Lies to you
- Swears at you
- Calls you before 8 am or after 9 pm
- Calls you at work after you tell them not to
- Threatens legal action without the right to do so
How to Hire a Debt Collection Attorney
Overall, you will typically want to hire a debt collection attorney if you can afford to do so. The following information will help you do so.
Where to Find a Debt Collection Attorney
Your options for finding a debt collection attorney are similar to those when finding a lawyer with any other specialty:
- Ask another lawyer (with a different specialty) for a recommendation.
- Ask family or friends for a referral.
- Look at online directories.
- Check with your state or local bar association.
- Check with legal aid organizations.
Related post: Can Debt Collectors Take Your Stimulus Check? [ANSWERED]
How to Screen Debt Collection Attorneys
Getting a recommendation for an attorney reduces the need to screen them somewhat. Even so, it is still smart to do some quick checks. If you find a lawyer via an online directory, it is especially important to screen them.
For example, look at their experience and qualifications. Check online reviews and ratings for the lawyer.
How to Find Low-cost or Free Lawyers
If you are on an extremely tight budget, you may still be able to find a debt collection attorney to represent you.
Look for legal aid organizations, such as the Legal Services Corporation. You are more likely to qualify for representation if you are elderly, receive social security, receive public assistance, or are low income.
You can also ask your local bar association for recommendations of lawyers who work pro bono or for reduced fees. Most will have lists of these attorneys.
Further Reading: What Is A Good Debt-To-Equity Ratio? [ACCOUNTING TIPS]
How Much You Can Expect to Pay
The price for debt collection attorney services can vary greatly. It will likely depend on several factors, including:
- Whether you dispute or agree that you owe the debt
- If you have a counterclaim or defense
- Whether a settlement is likely
On top of that, your attorney is likely to use one of the following pricing models:
- Flat fee – With this model, you pay the attorney a set amount, no matter the result of the suit or how long it takes.
- Per hour (with a cap) – In this model, the lawyer charges you for every hour that they work. This model typically has a price cap, so you know the maximum you will pay. That cap also prevents you from paying more than the value of the lawsuit.
- Based on the result – This model typically means that the attorney receives a percentage of the amount they save you. A common example would be a percentage of the difference between the settlement amount and original debt.
- Payment from the creditor – In the case where you have a counterclaim and are unlikely to have to pay the debt, your attorney may be paid by the creditor. This is most common in the case of illegal debt collection practices.
In cases when you do not pay the attorney upfront in full, expect to make a down payment or retainer. The amount will depend on how long the lawyer thinks your case will take and the amount the creditor says you owe.
A debt collection attorney can help you fight a debt collection suit that you believe is unfair or inaccurate. If you believe the debt is accurate, they can help you reach a settlement. Look for recommendations and consider the lawyer's experience and fees.
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.