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Debt Settlement

What is Debt Settlement?

Debt settlement is where you and your creditors enter into agreements whereby the creditors will agree to release their claims against you in exchange for a sum of money, typically less than you owe them.

This may seem strange that creditors would accept less than what is owed to them, but lurking in the background is the possibility of non-payment: your creditors would rather get paid less than is owed to them than nothing at all.

For debt settlement negotiations to be effective, creditors must understand that there is a real possibility that they will not get paid. Otherwise, your creditors will not be motivated to settle for a reduced balance.

When you stop making payments to your creditors because you can no longer afford them, your creditors will be on alert. Non-payment will open the opportunity for debt settlement. The game begins, and you will soon be inundated with collection calls. When your delinquent accounts are managed properly, very favorable settlements can be negotiated. On the other hand, if your delinquent accounts are not managed properly, you face the real possibility of lawsuits.

Once a creditor has filed a lawsuit, it becomes a lot more difficult to settle because the creditor has turned over the account to an attorney whose goal is to obtain a judgment against you. Knowing that the account holder, or defendant in this case, likely has no legitimate defense to the lawsuit, the attorney is not motivated to accept a low settlement offer. Once creditors have won and obtained a judgment against you, they can freely garnish your wages, levy your bank accounts, and place judgment liens against property that you may own and later acquire. After that point, debt settlement may no longer be an effective option. If, for some reason you are ineligible for bankruptcy, you may now have compromised your ability to become debt-free.

When individuals are handling the debt settlement process themselves, they are quick to threaten bankruptcy. With this message, the right buttons are being pushed; however, as a matter of policy, creditors do not take the threat of bankruptcy seriously, unless it comes from a bankruptcy attorney. A reputable bankruptcy attorney can add a tremendous amount of leverage to the debt settlement process. Read below to find out how a bankruptcy attorney can really add credibility to the threat of non-payment.

You might be considering enlisting the help of a non-attorney debt settlement company, like the ones you see on TV, to help settle your debt. Aside from the unscrupulous fee arrangement many of these companies have with their clients, they also cannot credibly create the threat of bankruptcy needed to obtain a good settlement for you, and in fact do the opposite. By engaging their services rather than a bankruptcy attorney’s services, you are clearly signalling to your creditors that you are interested in debt settlement, not bankruptcy, and this lessens their fear of your intentions and weakens your bargaining position. Further, many of these companies are created and funded by the credit industry, and so have a clear conflict of interest. All in all, these companies will often do you more harm than good.

Instead of any of the above option, what you really should do is retain a reputable bankruptcy attorney to show your creditors that that you mean business when it comes to filing bankruptcy. This is the best way to create the desired fear within your creditors because of how much closer such an action brings them to realizing their fears of receiving nothing. Here’s why:

First, you have shown them that you are willing to act on your threats by retaining a bankruptcy. This is significant, as most people pursuing only debt settlement will not take this step. Creditors will take you much more seriously once a bankruptcy attorney is on board. In fact, most creditors assume that a person who retains a bankruptcy attorney has finally crossed the mental threshold that stood between them and bankruptcy, and now has embraced the idea of filing bankruptcy.

Also, your creditors will assume that the attorney you have retained will be counselling you to file bankruptcy because that is his/her area of expertise. Most bankruptcy attorneys are not set up to handle debt settlement, which can prove to be a very labor-intensive and tricky process. Debt settlement is essentially a specialized area of law, and your attorney should be chosen carefully.

Debt Settlement Services We Offer

Unlike most bankruptcy attorneys, Wadhwani & Shanfeld is a full service bankruptcy law firm that offers customized debt settlement solutions to clients who are better served by such services. We are capable of settling many types of debts, including credit cards, certain taxes, and 2nd mortgages.

Credit card settlement introduction and explanation

The most common type of debt that people have in their lives is credit card debt. The reason is simple: it is very easy to get credit, but much harder pay it back. As a result, the majority of debt we settle for our clients is credit card debt.

When settling credit card debt, like settling any debt, it is important to make the creditor fear getting paid nothing at all. Since every credit card company works differently, it is extremely difficult to obtain a good settlement without prior knowledge and experience with each of these creditors, even if you are an excellent negotiator. For example, some credit card companies would rather take a quick, low settlement while others need to be pushed to the brink to get any respectable settlement offers. Some sell your debt to an outside collection agency at some point in the process, while others keep it in- house all the way to lawsuit. And some creditors are quick to sue while others are not. Because lawsuits can make it much harder to get a good settlement, knowing which is which is essential to getting the best settlements.

Settling with your credit card creditors is like walking a bunch of different tight ropes, with the length and tautness being different for each. Step wrong once and you fall off for good. Read below to see why you should not attempt to settle your own debt.

Instead, we recommend you utilize the services of someone with lengthy experience with each creditor, such as the debt settlement professionals at Wadhwani & Shanfeld. Credit Card Settlement

2nd Mortgage Settlement

A 2nd mortgage is an extension of credit that a homeowner can obtain when the value of their property exceeds the amount he or she owes on the 1st mortgage.

If you have a 2nd mortgage, you likely got a loan when property values were much higher than they are today. You might even owe more on your 1st mortgage than your house is worth.

If that is the case, there is a special process in Chapter 13 bankruptcy that allows for your 2nd mortgage to be entirely extinguished through recognized legal paths. However, you do not need to file bankruptcy to realize nearly all of the benefits of this special process.

Again, utilizing that critical concept of creating credible fear of non-payment within your creditors, your 2nd mortgageholder may settle out your mortgage for pennies on the dollar if they fear that you will use the bankruptcy process to extinguish their lien such that they would receive nothing.

Again, this is a complicated process that requires getting your 2nd mortgageholder’s attention and making it eager to settle. As such, we recommend using the services of experienced debt settlement professionals, such as those at Wadhwani & Shanfeld, to make sure you have the best leverage and experience coming to bear on your settlement negotiations. 2nd Mortgage Settlement

Tax Settlement

Tax debt is debt that arises out of money owed to the government, and can take many forms. One common form is income tax debt, which can arise when not enough money is withheld from your paycheck, and the IRS or State tax entity comes after you for the difference. Another type is property tax, where the taxes on property you own go unpaid.

All taxes are owed to some government entity, so when you are trying to settle your tax debt, you are negotiating with the government. This is a daunting task, made even more daunting by the fact that most tax debt is not dischargeable in bankruptcy. As a result, it is hard to create that fear that you need to create to get a good settlement, or any settlement at all.

Further, government tax entities can take the same, and sometimes more, actions to get paid as common creditors, including wage garnishments and lien on your home, car and bank accounts.

There are, however, some weak spots in the government’s armor, namely that as their claim begins to age, it becomes dischargeable in bankruptcy. So, the name of the game in tax settlement is seasoning the claims to the point where bankruptcy becomes a viable threat that can be made.

This is a tricky process riddled with pitfalls for the unwary, so you want to use someone with experience, such as the debt settlement professionals at Wadhwani & Shanfeld. Tax Settlement

Debt Settlement FAQ

Q: Should I try to settle my debt on my own first?

A: Likely no. Since you do not need the services of an attorney or debt settlement professional, you might be tempted to try to settle your debt on your own. This can be dangerous because one wrong step and you might sabotage any possibility of obtaining a good settlement, or any settlement at all. Creditors are very astute at discerning their borrowers’ true intentions, and they keep meticulous records of conversations that you have with them.

Further, credit card companies are notorious for offering good settlements to willing borrowers, but failing to complete the paperwork that releases the borrower from the debt. Finally, you alone might not be able to create the credible fear of non-payment in your creditors.

Q: Should I use one of those debt settlement companies that I see on TV?

A: While we cannot say for sure that all of these companies are the same, our experience with clients who have come to us from these other companies tells us that you should at least beware and do your research before signing on with one of them.

To start, most of them have D or F ratings with the Better Business Bureau. The reason for this is simply that their clients have an all-around terrible experience with these companies.

First, these companies have no leverage, and thus have no ability to create a credible threat of non-payment that, say, a bankruptcy attorney’s office would be able to create.

Second, they take their compensation based on your total amount of debt, rather than the amount they save you. This means that their interests are not as aligned with yours as they should be because they get paid the same no matter how poor of a settlement they get you.

Worse, they take their fee up-front before they have done any work. Most clients do not realize this as they begin to make payments to the debt settlement company. They think they are continuing to pay down their debt, when in fact they are paying the company. And since they are not actually paying their creditors a penny, their creditors get spooked and sue.

By the time people realize what has happened, the company has gotten them poor settlements, taken thousands of dollars for themselves without paying a dime to the actual creditors, and caused their clients to be sued for non-payment. It is easy why people who experience this feel deceived and scammed.

Q: Why would my creditors settle with me?

A: It would be nice to think that your creditors would see that you are genuinely struggling to make your payments to them, and thus are willing to take less money from you to make your life a little easier.

The reality, however, is that they are motivated only to maximize the amount of money they recover from their borrowers.

Under the right circumstances and pressures, a creditor can be made to believe that taking less than they are owed is better than the alternative: nothing.

Q: Should I declare bankruptcy instead of trying to settle my debt?

A: This question is very complicated, and depends on whether you (a) can file bankruptcy; (b) want to file bankruptcy; and (c) should file bankruptcy.

Q: Do you service my location?

A: We service all of California, with offices in Sherman Oaks, Long Beach, Ontario, Lancaster and Los Angeles.

If it is not convenient to visit one of our offices, we can handle your entire case by phone and email! Please give our office a call for a free consultation.

Debt Settlement Video

Debt Settlement Fees

Our fees are very competitive and reasonable, and tied to the amount of work we put into your case. Please call our office for a free consultation to find out more.

Why Wadhwani & Shanfeld for Debt Settlement?

At Wadhwani & Shanfeld, APLC, we are uniquely positioned to get you the best settlements results possible. We have the experience of having negotiated and settled with almost every major creditor, and we track the idiosyncrasies of each so that we can tailor a strategy that is perfect for your situation. As a bankruptcy firm, we also have the leverage needed to catch your creditors’ attention and make them eager to settle with you. We can usually settle your debts for 40-60% of what you owe, even after taking into account our reasonable fees, which are based on how much we save you, not how much you owe.

If you are interested or have questions, we offer a free consultation to help you decide what your options are and whether debt settlement makes sense for you.
We also have offices all around Southern California, so we are never far away. If you do not want to come in, we can handle your entire case by phone and email.

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