How to Negotiate a Debt Settlement with a Law Firm

Edited by Hannah Locklear

Owing an old debt can be very frustrating. Somewhere in your mind, you’re aware of the lingering money you owe, and you wonder how you’ll pay it or if anyone will pursue you for it.

Debts don’t usually go away on their own. A creditor may grow tired of pursuing you and write the debt off, but they’ll usually sell it to a debt collection agency. Once a debt collection agency purchases your old liability, they’ll begin a collection process that may be even more annoying than that of your original creditor.

Most debt collection agencies begin the collections process by notifying you they now own your old debt. If you ignore their notification, they’ll start contacting you via letters, emails, and phone calls. Sometimes they’ll attempt to reach you via your job or social media accounts.

In some cases, the debt collection agency is a law firm. Creditors often turn over debts to law firms if the amount due is significant or there is a high likelihood the firm will be able to obtain a judgment against you.

You may have serious concerns if a lawyer takes charge of collecting your debt. After all, attorneys know the ins and outs of collecting debts and are less likely to bend to any defenses you use in your case.

However, you still have options even if a lawyer seeks to pursue you for a debt. Let’s explore what to do if a lawyer is chasing you for an old liability.

You can hire your own lawyer

If a lawyer pursues you for an old debt, you can hire your own legal representation — a debt settlement attorney.

A debt settlement lawyer will attempt to negotiate with the other party to reduce the debt or eliminate it outright. These lawyers use a variety of defenses to protect you from a potential lawsuit.

For instance, the debt settlement attorney may argue that the statute of limitations on collecting the debt has expired. They may determine that you are the victim of identity theft or that the lawyer does not have a business relationship with you.

If your lawyer’s defenses are appropriate to your case, the law firm pursuing you will have no other option but to drop a potential lawsuit.

In a best-case scenario, the debt collector will write off the debt entirely. However, this isn’t likely if you truly owe the debt. While a lawsuit may be off the table, they can still pursue you with phone calls and letters for the next fifty years (or until you decide to settle with them).

A debt settlement lawyer who is working on your behalf can attempt to settle the debt for you. You may be able to reduce the amount you owe by as much as 60% or more.

If the debt collector agrees to a settlement, you simply pay the money, and they will report the debt as paid. You won’t hear from them concerning the debt again and can move on with your life.

However, if you hire an attorney to handle your debt, realize that you must pay for their services. In some cases, you may spend several thousand dollars for their assistance.

In situations where your debt is less than around $2,000, hiring a lawyer may not make sense. Even if you can settle the debt for half the amount, you’ll still owe fees for legal services. You won’t be saving much (except for the headache of dealing with a debt collection lawyer on your own).

Before deciding whether to hire a lawyer to handle the debt for you, consider the amount you owe and the fees for hiring an attorney. If settling your debt for half the total due plus the expense for an attorney adds up to roughly the exact cost of the total debt, it’s time to take matters into your own hands.

You can defend yourself against the law firm on your own

Sometimes, it's best to attempt to negotiate with the law firm trying to collect a debt yourself. The expense of hiring an attorney to handle your affairs for you simply doesn’t make financial sense.

If you decide to negotiate your debt with a law firm on your own, you’ll need to beef up on defense strategies concerning the debt. When the law is in your favor — meaning you have a reasonable defense that could eradicate the liability — make sure you understand how the protection applies to your case.

Some of the most straightforward defenses include the statute of limitations, identity theft, and previous payoff of the debt.

Statute of limitations defenses rest on the fact that creditors can only attempt to collect a debt through a lawsuit for a set period. For instance, if the statute limits credit card liabilities to three years in your state, you may have an adequate defense if it has been more than three years since you incurred the debt.

In an identity theft defense, you argue that someone stole your personal information and used it to borrow money illegally and without your knowledge. You’ll need to take specific steps to prove an identity theft defense, including reporting the incident to authorities.

Finally, the debt collection law firm may not have complete information if you previously paid the debt. You can provide evidence that you reimbursed the original creditor with a payment receipt, proof of check cancellation, or other evidence.

There are multiple other defenses available in a debt collection case. You’ll just need to choose one that fits your circumstances. Once you establish a defense, it becomes easier to negotiate the outstanding debt to zero or an amount significantly less than the current total due.

Ask the law firm to validate the debt

Before attempting to negotiate the debt, you’ll want to have the law firm validate that you owe them money. By law, any collection agency or law firm that attempts to collect money from you must prove that it has the right to collect a debt. It must also confirm the amount of the obligation.

Typically, a law firm collection agency must provide notice of an attempt to collect a debt and give you thirty days to dispute it. Once this period passes, the law firm can begin regular collection activities, including attempting to sue you for the debt.

To buy time and ensure that the law firm has the right to pursue collection activities against you, make the law firm validate the debt. The burden of proof is on them to establish you owe them money.

You can force them to validate the debt by sending a Debt Validation Letter. Check out this video to learn more about how a Debt Validation Letter can help you fight off debt collections:

If they can validate the debt, then it’s time to use your defense strategy (if you have one). Keep reading to learn more.

Negotiate a debt settlement with the law firm

People with a solid case against the debt collector have the best chances of significantly lowering their debt. For example, debts with a statute of limitations that is soon to expire can make a law firm much more willing to come to the negotiating table, and other defenses can also be helpful.

Start by contacting the law firm and asking to speak with the assigned attorney. Let them know you are reaching out to them concerning a debt, and give them the identifying information about the claim. Usually, an account number or some other type of identifier will be present on the notification you receive from the law firm.

Next, explain any defense you have to the claim. If the statute of limitations has run out, let them know and explain why. You can also notify them of other defenses, like an incorrect account balance or the fact that you intend to file for bankruptcy.

Once they understand your defense, tell them you wish to settle the matter so you can move on with your life.

It’s essential to start low with your negotiations. For debts old enough to satisfy the statute of limitations, you can attempt to offer as little as 25% of the original balance. The law firm will know it has no option for pursuing a lawsuit against you, so it may be more willing to settle and write off the debt.

If your obligation is not old enough to meet the statute of limitations, you can still attempt to negotiate a settlement or payment plan. However, you likely won’t be able to reduce the amount you owe by more than 50%. In most cases, a law firm will only agree to eliminate 20% to 30% unless you have a strong defense.

Even small savings can help you get rid of the debt. If a 20% to 30% reduction is all the law firm will agree to, it’s usually best to take the offer and pay off the amount due. If you don’t have the financial means to pay the bill at once, try to work out a payment plan that you can handle.

While a notice from a law firm trying to collect money from you may be concerning, realize that you have rights. Try to work out a settlement and avoid damaging your credit any further.

Let's consider an example.

Settle your debt on your own with SoloSettle

What’s better than paying off a debt in full? Negotiating an amount you can afford to pay. Through debt settlement, you may be able to reduce your total liability by 30% or more. In the best cases, a law firm will agree to knock off up to 75% of the debt.

Hiring a lawyer or a debt settlement agency is expensive. Sometimes, it can even cost more than the debt you owe. That’s why we created SoloSettle: so you can settle your debt on your own, save money, and avoid working with debt settlement companies that aren’t always reliable.

SoloSettle, powered by Solosuit, is a tech-based approach to debt settlement. Our software sends and receives debt settlement offers on your behalf and helps you negotiate the best deal for your circumstance. Once an agreement is reached, SoloSettle helps you manage the debt settlement agreement documentation and forwards your payment to the creditor, debt law firm, or collection agency. This helps you protect your financial information from unruly debt collectors.

To learn more about how to negotiate your own debt settlement, check out this video:

Check out this review from a real SoloSettle customer:

“I'm very thankful for SoloSettle.. Having a third party negotiate the settlement was instrumental in resolving this case and saved me from two giant headaches: 1) I didn't have to deal with the plaintiff's lawyer and 2) I didn't have to go to court. I also love that the payment was processed through SoloSettle. I was nervous about sharing my personal financial data with the other side, but SoloSettle protected that for me. I hope I never get sued again, but if I do, I would use SoloSettle again in a heartbeat.

SoloSettle really saved me a ton of time and heartburn and kept me from having to be my own lawyer in court.”

Use SoloSettle to settle your debt on your own.

What is SoloSuit?

SoloSuit makes it easy to fight debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.

SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

>>Read the NPR story on SoloSuit. (We can help you in all 50 states.)

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