Good idea to use attorney to pay off a collection The Bankruptcy Adviser by Justin Harelik • Bankrate.com

Dear Bankruptcy Adviser,
Due to some bad decisions on my part, I have a few debts out there that are two or more years old. I do not know what the bankruptcy laws are now and am unsure how to go about clearing this matter up. I have received many notices from collections and law offices and really do not want to go to court over the matter. I would like to make a lump sum payment but am unable to. What are my options?
-- Robert
 

Dear Robert,
I can tell that you're taking a proactive stance, and that's a good thing. You have two options. The first is to hire an attorney (or debt negotiation company) to call each collection agency and law firm to negotiate a settlement. The second is to do it yourself.
 
While you might save money in the very short term by doing it yourself, i.e., by not spending money on an attorney, in the long term you will almost certainly save a great deal more by hiring an attorney.

Here's why:

• Collection agencies fear attorneys because they fear lawsuits -- and for good reason.  Collection agencies, and even law firms using aggressive collection tactics, will sometimes say inappropriate things on the phone to debtors. It may be twisted, but you are more likely to get more favorable settlement terms when you have been harassed and treated poorly. • Attorneys who do this kind of work negotiate for a living. They know the rules of the game and how to apply them to achieve the best result. As well, they might deal with the same collecting agencies many times over their careers. This encourages the agency to treat the attorney (and his or her clients) with respect.

If you insist on negotiating yourself, here's a primer to get you started:  

• DO have a story explaining specifically why you are having trouble paying the debt. Maybe you had a period of unemployment; maybe you went through a divorce or had a significant illness. These are all reasons to get a lower settlement amount.

• Do NOT call the company and immediately offer a settlement amount. You have no idea what they are going to offer you. It could be much less than you are willing to pay. Let them make the first offer.

• Do NOT call the company unless you have the money. Sometimes they will accept a payment plan, but that will cost you more. A lump-sum payment will always be your cheapest option.

• Do NOT give the agency any more information than your name and account number. Don't tell them where you work; don't tell them your current address. They can ask ... and you can ignore them and go back to negotiating. If they press you, simply say, "I don't want to waste your time. Please don't waste mine."

• Do NOT let them report this account as settled on your credit report. A settled collection account is as harmful to your credit score as a delinquent account. Offer your payment in full (and be willing to pay a little more) if they will remove the negative mark. Many collection agencies will do this because they want to be paid. If you cannot get the account removed, then try to get them to report the account "paid as agreed."

• Do NOT act timid. Believe it or not, you are in the power position, because most people do not proactively contact collection agencies to pay their debt. You are making their job easier. That gives you the right to demand a better deal.

Justin Harelik is a practicing attorney in Los Angeles office of Price Law Group. To ask a question of the Bankruptcy Adviser, go to the "Ask the Experts" page and select "bankruptcy" as the topic.