My nephew is 62,000 in outstanding debt all which are not in collections. We have contacted a lawyer that says he will get the amount down about 40% and then we pay them about $8000 over a period of 11 months. They want my nephew to sign something before we really know the exact amount that will be settle on. It doesn’t sound right to me.
Can’t we call the companies (or the collection companies) that he owes money to and try to negotiate a settlement and then pay it off?. If we can do that is there a way to cover him so that the credit card companies do not come back at a later date and demand more money? We really don’t know what is best for him. We would like to help him (even financially ) but honestly don’t know the best way to approach is and who to trust. Most of the “debt consolidators” and lawyers tell us not to call ourselves because they won’t do anything for us or we will screw up the negotiations- is that right?
Help- what is the right thing to do?
I asked my friend Susan Nilon to answer your question for you. I wanted to make sure you got an answer as quickly as possible as I’m a bit backed up at the moment. I’ll be watching the comments on this question and be around to help if you need me.
I agree with your concern about not knowing the settlement amount before you sign an agreement. Could it possibly be a contract between your nephew and the attorney for his services? It is not uncommon for the attorney to require a contract that will grant payment of a percentage of the debt settlement. Until the contract it agreed upon, the attorney will just give your nephew an estimate of the settlement based on previous experiences.
My first piece of advice is for you or your husband to not commit to anything personally for your nephew’s debt settlement. Even though you care enough to help him out, make no commitment by signing any documents on his behalf. Your nephew is an adult. He was able to acquire this debt on his own and he needs to handle this without you being held responsible. Giving him advice is just fine. And if you feel compelled to help him out financially, do it in a way that will help him put food on the table, not assume his debt. Do not negotiate anything that will require you to be held responsible. Even if you think the solution is to co-sign a loan for him. Resist the urge to take your help that far. Debt like that will bring you down along with him.
Your nephew can call his debtors on his own to try and negotiate his own settlement, but by the figure that you gave above – A $62,000 debt reduced to $8,000 sounds like a good deal if that is what the attorney thinks will be the outcome.
Quite often attorneys can negotiate a better deal because they are more experienced in how to handle debt settlement. But that should not limit your options. If your nephew is so inclined to call the credit companies himself, then he should. His debtors might be more receptive if they hear from him first. Then if all else fails, having a professional step in would be the next step.
Another concern I have is why your nephew is in so much debt. Did he lose his job? Is he living well beyond his means? Did a tragedy occur in his life that he was not prepared to handle? Without knowing these answers, I can only advise you to help your nephew to seek other forms of counsel. Maybe bankruptcy is a better avenue for your nephew. Talking to a bankruptcy attorney will help you see what is at risk and what is to gain.
If your nephew was to accept the settlement that was stated above, could he pay that amount off in 11 months? You might want to suggest your nephew seek the help of a credit counselor.
In the meantime, ask around for references of this attorney. Maybe someone else you know has had the same experience and can give you some advice on what happened to them. And ask the attorney to give you the answers to your questions. If you are still not feeling comfortable with the answers, then call up your local or state Bar association and ask for a referral. There are many attorneys that can offer you the experience that you need for your nephew to make a smart decision about his financial future.