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If you're saddled with thousands of dollars in credit card debt, the lure of someone promising to cut your debt in half could be strong.  But debt negotiators – companies that try to persuade your creditors to forgive some of your debt – are generally bad news.  Debt negotiators contact creditors for consumers and try to work out a payment plan that those consumers can afford.  They also supposedly try to convince the creditors to take what they can get and forgive the rest.  But while losing part of your debt load might sound appealing, it might not be the best move.  "Steer away from debt negotiators," says Nick Jacobs, director of public relations for the National Foundation for Credit Counseling.

One reason: Debt negotiators don't work for free, Jacobs says.  Negotiators have various ways to determine their fees.  Some charge an upfront cost.  Others charge a percentage of your total debt while others charge based on the amount they are able to get creditors to forgive.  Any way you look at it, the money you give the debt negotiator could be money used to pay down debt.  Not only that, but it's important to do the math.  If a debt negotiator gets creditors to forgive 15 percent of your debt and the negotiator wants 10 percent for his work, you might have been better off applying the 10 percent to your debt.

Another reason a debt negotiator can spell bad news for you and your credit is because they often tell consumers to stop paying their bills while negotiations take place. "The problem with that is you have an obligation to the credit card company to make a payment, so in not doing that, you're harming your credit rating and creditors are well in their rights legally to do whatever they have to do," Jacobs says.  "You're really playing with loaded dice."

What if the debt negotiator is able to convince your creditors to forgive some of your loans?  Won't that raise your credit score?  Not necessarily, and it might make the situation worse.  If credit card companies write off your debt as a "charge-off," other creditors will not view you as a good risk since you have a record of not paying your debts in full."  A charge-off is not good on your credit report," says Jennifer "J. B." Bryan, founder and president of J.B. Bryan Financial Group based in Washington, D.C.  That blight on your credit report would last for the next seven years.

There are also tax ramifications to forgiven loans. The Internal Revenue Service requires that lenders report cases in which they've forgiven debt of $600 or more in a calendar year.   The IRS considers that money to be taxable income to the person whose debt was forgiven.  After all, if a lender agrees to forgive $1,000 worth of debt, that lender is, in effect, giving you a gift of $1,000.  While the tax consequences do not necessarily mean you should avoid having loans forgiven, they are definitely something to keep in mind when weighing the risks and benefits of such a move.  Another factor to consider is that the negotiator might not be successful – failing to convince your creditors to work with you – leaving you not only without the money you paid the negotiator, but more months behind in your payments if you stopped paying your creditors during the negotiation process.  Then there's the matter of scam artists.  "There are a lot of bad actors out there who will just take the money and run," says Jacobs.  "You're paying them and not paying your creditors."

There are ways you can check on the background of a potential negotiator if you decide to go that route.  Check with the Better Business Bureau or your state attorney general's office to see if any complaints have been made against the company or individual.  Also ask the negotiator plenty of questions about his or her background.  Does the negotiator have any licenses that let you know that he or she is particularly savvy about finances?  Because you're putting your financial future in the hands of this person or company, you want to take the time to find out as much as you can about their expertise and track record.  Whatever you ultimately decide, steer clear of anyone promising to resolve your debt situation instantly and magically.  The bottom line is when it comes down to getting out of debt, there is no quick fix or solution.  "Some folks advertise (800) get-out-of-debt," says Jacobs. "They're selling you a dream.  Getting out of debt is a very difficult, usually a very lengthy, painful process."

A. Users Must Have a Permissible Purpose

Congress has limited the use of consumer reports to protect consumers' privacy. All users must have a permissible purpose under the FCRA to obtain a consumer report. Section 604 of the FCRA contains a list of the permissible purposes under the law. These are:

As ordered by a court or a federal grand jury subpoena. Section 604(a)(1)

As instructed by the consumer in writing. Section 604(a)(2)

For the extension of credit as a result of an application from a consumer, or the review or collection of a consumer's account. Section 604(a)(3)(A)

For employment purposes, including hiring and promotion decisions, where the consumer has given written permission. Sections 604(a)(3)(B) and 604(b)

For the underwriting of insurance as a result of an application from a consumer. Section 604(a)(3)(C)

When there is a legitimate business need, in connection with a business transaction that is initiated by the consumer. Section 604(a)(3)(F)(i)

To review a consumer's account to determine whether the consumer continues to meet the terms of the account. Section 604(a)(3)(F)(ii)

To determine a consumer's eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant's financial responsibility or status. Section 604(a)(3)(D)

For use by a potential investor or servicer, or current insurer, in a valuation or assessment of the credit or prepayment risks associated with an existing credit obligation. Section 604(a)(3)(E)

For use by state and local officials in connection with the determination of child support payments, or modifications and enforcement thereof. Sections 604(a)(4) and 604(a)(5)

In addition, creditors and insurers may obtain certain consumer report information for the purpose of making unsolicited offers of credit or insurance. The particular obligations of users of this "prescreened" information are described in Section V.

The Complaint

Litigation begins when the plaintiff files a complaint with the court and sends a copy of the complaint (by service of a summons) to the defendant. The complaint explains what the defendant did (or failed to do) that caused harm to the plaintiff and the basis upon which the defendant should be found legally responsible to the plaintiff.

The Answer

The defendant is given a specific amount of time to file with the court an answer to the complaint (usually 3-4 weeks). The answer explains the defendant's side of the dispute. Sometimes, the plaintiff responds to the defendant's answer by filing a reply. In some instances, in lieu of an answer or reply, a party may request that the other party clarify or correct deficiencies in its factual allegations or legal theories, and this may lead to amended complaints or amended answers. Once the parties have settled on a complaint, and answer, the case is said to be "at issue," which means that the issues for resolution are now defined.

Motions

Before trial, the parties may use motions to ask the court to rule or act. Motions usually pertain to law or facts in the case, but sometimes they seek clarification or resolution of procedural disputes between or among the parties. Some motions, such as the motion for summary judgment, which asks the court to dismiss part or all of a plaintiff's case or a defendant's defense, dispose of issues without trial. Other motions might ask the court to order a party to produce documents or to exclude evidence from trial.

Trial

At trial, the parties present evidence in support of their claims or defenses to a jury and/or judge. Immediately before trial, each party provides to the judge a document, called a brief, that outlines the arguments and evidence to be used at trial. In a jury trial, both parties question potential jurors during a selection process called voir dire. Once the jury has been selected, each party presents its outline of the case in an opening statement. Evidence is then presented. Each party may call witnesses or introduce documents and exhibits in support of its arguments. The plaintiff presents evidence first, then the defendant. Sometimes, the plaintiff is allowed to present additional evidence, called rebuttal evidence, after the defendant has finished presenting its case. Once all the evidence has been presented, the parties give their closing arguments.

After closing arguments, the court instructs the jury on the law to be applied to the evidence. The jury then deliberates and reaches a decision or verdict.

A party may challenge a jury's verdict. Errors of law committed by the trial court or a jury's disregard of law or evidence are common reasons for challenging a jury's verdict.  A motion for judgment notwithstanding the verdict asks the court to disregard the jury's verdict and enter a different decision. A motion for a new trial asks the court to set aside the jury's verdict and order a new trial of the case.

Appeal

Following trial, a party dissatisfied with the result may seek an appeal. During an appeal, a party asks another court to review the trial court proceeding. The parties present their arguments in briefs, which are submitted to the appellate court along with the record of evidence from the trial court. An appeal can extend the litigation process by a year or more. The appellate court usually reviews a case for legal error only. Except under unusual circumstances, the appellate court will not review factual evidence or disturb a jury's findings of fact. The appellate court announces its decision in a document called an opinion. The appellate court will affirm the verdict if it finds no error. If an error is found, however, the appellate court may reverse the verdict or order the trial court to conduct a new trial.

Settlement

It is generally wise at the outset of any litigation proceeding to review the potential and prudence of an out-of-court settlement. Indeed, most matters settle before reaching the trial stage. Settlement can be discussed by any party at any time during litigation and is often a cost-effective alternative to trial. Usually the court does not require the parties to discuss or attempt settlement, but most courts have procedures by which a party can request the court's assistance in settlement.

Alternatives To Going To Trial – Arbitration, Mediation, and Settlement

Arbitration and Mediation

Two additional alternatives to litigation are arbitration and mediation.

Arbitration is an adversarial proceeding in which the parties select a neutral third party, called an arbitrator, to resolve their dispute. The process is abbreviated and less formal than trial. Arbitration often arises from private agreement, but many courts also require the parties to smaller disputes to explore arbitration as an option to trial. Parties who agree to settle their dispute using "binding" arbitration usually cannot appeal the arbitrator's ruling to the court.

Mediation also involves a neutral third party, but it is the mediator's job to assist the parties' settlement efforts. The parties select the mediator, who meets privately with each party to discuss the strengths and weaknesses of each side's case. The mediator helps the parties identify the risks of the case and encourages them to consider how those risks can affect their goals.

Whether arbitration or mediation is feasible and practical usually depends on the parties' willingness to use these methods. Each alternative usually saves time and expense, but either also might not result in a final resolution of the matter. The desirability of these alternatives should be evaluated early to allow their timely implementation.

Case Duration, Preparation, and Discovery

The duration of a lawsuit depends on the issues of the case, the amount of discovery to be conducted, and court scheduling and availability. The parties, guided by the rules of court, usually decide the timing of discovery. Trial dates are set by the court. Timing and scheduling differ between state and federal courts.

Thorough case preparation is critical to any successful litigation. Research of the law, document review and organization, and witness interviews help clients and their lawyers assess the merits of claims and defenses. The extent to which these and other steps are needed is determined by the issues of the case.

Discovery is the method by which parties gather relevant information from each other or from third parties. Discovery is the longest part of the case: It begins soon after a lawsuit is filed and often does not stop until shortly before trial. During discovery, the parties ask for information about the facts and issues of the case. Information is gathered formally through written questions (known as interrogatories), requests for documents, and requests for admission (which ask a party to admit or deny statements of fact). The use of depositions, in which witnesses are questioned under oath and in front of a court reporter by the parties' attorneys, is another key method of obtaining information. Depositions sometimes may be used at trial to show inconsistencies in a witness's story or to question the witness's credibility. Depositions sometimes also may be used in place of a witness who is not able to attend trial in person.

Often a claim or defense requires support from expert witnesses to explain technical information or validate an argument. One or more experts might be needed to testify about the connection between the defendant's conduct and the loss suffered by the plaintiff or the existence and amount of the plaintiff's damages. Expert witnesses work closely with a party's representatives and attorneys to prepare the party's case.

Conclusion

A positive result in your case is the product of teamwork. You bring your information and familiarity of the facts necessary to effective case preparation. We provide the legal expertise to help you through the litigation process.  The strength of our partnership depends on mutual communication and understanding. The expectations outlined above are guidelines to facilitate an open and candid working relationship. The product of this relationship will be a resolution consistent with your goals and business philosophy.

Hyde & Swigart is has been involved in, and is familiar with, all of these processes.

1. on a contingency basis;
2. on an hourly basis;
3. on a fixed fee basis.

Contingency fee cases are generally limited to consumer litigation, personal injury cases employment cases, worker's compensation cases, and civil rights matters.  In these types of cases, there is some expectation that you will receive some financial award either by settlement or by judgment from a court or jury.

In contingency fee cases, the attorney assesses whether or not he or she believes that you have reasonable chance of succeeding.  If the attorney feels that you do have a reasonable chance, the attorney may take your case by investing his or her time without a fixed payment from you up front.  Basically the attorney is counting on being paid from a percentage of any award which you receive from a settlement or from a court.  In some cases there is a cap or limit on the percentage or the dollar amount that an attorney is permitted to charge.  You should ask the attorney if there is such a limit and what it is.  In most personal injury cases, there is not a limit on what the attorney can charge.  If your case is lost, the lawyer is paid nothing for his or her time.

Hourly cases are different.  Attorneys charge an hourly rate for most standard routine matters.  The amount your attorney charges per hour will be determined by a number of factors.  The most important factor is his or her experience in the type of matter for which you are being represented.  Another factor will be the generally accepted charges for similar matters in your legal community.  In most hourly cases, your attorney will request that you pay a retainer fee up front against which the attorney will bill his or her time.  When your attorney is charging you an hourly rate, you should always ask your attorney to periodically provide you with an itemized statement of the time which he or she has expended on your behalf.

Fixed fee cases.  Sometimes, attorneys will charge a fixed fee.  That is, a one time lump sum payment.  Attorneys charge a fixed fee for standard routine matters such as wills, deeds, the search of a real estate title, representing you in a simple bankruptcy, drafting a basic contract, traffic offenses, or minor criminal matters. These are some but not all of the examples of tasks for which an attorney may charge you a fixed fee.

Whenever you believe that you need an attorney, you should discuss attorney's fees during your first conference with the attorney. You must clearly understand the way in which the attorney intends to bill you for handling your legal matter. You should expect to sign an agreement with your attorney regarding fees so that both you and your attorney have a clear understanding of what to expect. In some cases, a contract of representation between you and your attorney is not required.

You should never be afraid to discuss attorney's fees or to negotiate attorney's fees with your attorney at the beginning of your representation. Having a clear understanding between you and your attorney on the issue of fees will assure a good working relationship between you and your attorney.

Generally, Hyde & Swigart Charges Attorney Fees As Follows.

Below are guidelines to help you anticipate what might be expected of you with regard to attorneys’ fees.  However, because we want to help you if you need us, we can sometimes be flexible in these arrangements.  If you feel you need some flexibility, be sure and discuss this with us during your first consultation with us.  Keep in mind that we never charge anything for a case evaluation.

Consumer Cases (Debt Collection Abuse, Debt Negotiator Lawsuits, Cases In Which We Represent You Suing Others) – These cases are taken on a contingency fee basis,  Our office pays the costs up front with the expectation that we will be reimbursed if we prevail.  We keep track of the attorney fees incurred and attempt to have the opposing party pay them.  In these cases, if we do not prevail you are not expected to reimburse us.  In that situation, we waive the attorneys’ fees and costs.