Our great country has been experiencing a major economic downturn over the last couple of years causing millions of people to suffer financially and the state of New Jersey has been no exception. For New Jersey residents one of the worst financial problems many are dealing with is having to much credit card debt to realistically continue paying on. This is where a New Jersey debt settlement service can help.

First let me state that this will be a very long article and do not continue to read unless you are in debt and are seriously looking for an answer to this problem. I personally have been in the debt relief industry for over a decade now and have a very in depth knowledge of how the industry works. In this article I will explain how debt settlement works and why if you are living in New Jersey how imperative it will be to get a New Jersey debt settlement law firm to assist you with your financial hardship. I will also in this article offer advice on how to tell if a debt settlement company may be nothing short of a scam. So read carefully!

Let us start with what debt settlement is. Debt settlement which is also referred to as debt negotiation is a process of settling out your accounts for a much lower amount than what is currently owed; thus saving the debtor a lot of money and time.

The first step in this process is one that may put some people off but is necessary to achieving the settlement and savings of money. First you must discontinue making payments on your debts owed, for those who are already behind this is a mute point; however for those who are current you must understand this at first will have a negative effect on the payment history portion of your credit rating.

No creditors are willing to settle an account that is current, if they feel you can continue paying the minimums for decades and lose tens of thousands of dollars running on their credit treadmill that's precisely where they would like to keep you. Not until you stop paying them will they pay attention and be willing to talk in terms of settling the account.

When you begin to fall behind instead of paying the creditors each month you will be saving up the required money to then later on negotiate a one time lump sum payment to settle the account for much less than what is owed. In many cases the debtor can save up to half of what is owed and be debt free in two to three years.

At this point I would like to go over some issues with debt settlement and how they are handled differently with a law firm when compared to a standard company. Pay attention carefully because when you are interviewing a New Jersey debt settlement company you will want to listen to what these folks have to say and there are a number of warning signs to look out for that will indicate whether the company is legitimate or not.

Let's talk about what happens when you fall behind on the payments. For one your credit if you are current will suffer. Now you must understand that 35% of your credit score is made up of your "payment history" this is where the initial negative effect will happen. However once you start paying off the accounts your score will naturally rebound. Why? Because 30% of your credit score is your "debt to credit ratio" which will look much better once you have these accounts paid off.

Let me state that the shady debt settlement companies will either briefly go over this or just flat out lie stating that there will be no effect on the credit. Another negative aspect to falling behind is dealing with collections calls. By law no debt settlement company has any legal standing to actually stop these calls. In many cases the company will simply tell their client to send out a "cease and desist letter" themselves, which may prompt further action from the creditors.

For people who retain a New Jersey debt settlement law firm things will be a little different concerning the collections calls. A law firm by law can stop the third party collections companies from calling and harassing their clients according to the FDCPA (Fair Debt Collections Practices Act). A law firm will also upon retention of their services issue letters to the creditors making them aware that you are being represented by the respective firm you have retained.

So that is the first major difference between a law firm and your standard company. Any company that claims they can stop all the calls is simply lying just to get you enrolled!

This brings us to another issue that can happen from falling behind and that is the chance of being sued by the creditors. Let me first state that it is not the common practice for the creditors to take people to court, it simply costs them too much money and time, with no guarantee of getting anything in return. However it is possible and if it happens you want to ensure you have the right organization behind you.

If you are summoned to court concerning a debt there will be nothing by law your ordinary debt settlement company can do for you. On the other hand if you retained a law firm you will be in a much better position. By law, a law firm can still contact and negotiate a settlement outside of court even after a summons has been issued. This is a huge benefit to the debtor!

Now let's go over perhaps one of the biggest reasons it is imperative if you live in New Jersey to retain a law firm over a company. The vast majority of debt settlement companies claim they can work in all the states, this is a flat out lie and can really hurt you the debtor in the future.

A debt settlement company can only work in the state it operates out of and each state has different laws concerning how debt settlement can be handled. And believe me the regulatory bodies have been cracking down very hard on companies operating illegally, even if they offer a sound and working service.

The problem for the consumer is if you are enrolled with a company not correctly set up in your state when the company gets shut down what will happen to you? What if you paid them all of their fees already? This is a nightmare scenario and happens to many debtors. The company gets shut down and simply does not have the money to reimburse their clients the fees they paid and can no longer offer them the service they paid for.

This is why it is so important to retain a law firm that can operate in your state and has a sound working knowledge of the laws in New Jersey. Not only will you have the benefits of reduced collection activity and greatly minimize the effect of a possible law suit but you will have the peace of mind that the firm will not be shut down and leave you with no money holding the bag.

I know in this article I have more so touched on the negative aspects of debt settlement, but I feel the client must be made fully aware of these issues before going down this route. But the reality is debt settlement has been helping millions of people each year get back on their feet financially. With the economy the way it is right now debt settlement is pretty much the only option many people have besides bankruptcy; so choosing the correct service can make or break their success. This is why I felt compelled to write this article in hopes that people in debt will read it and feel enlightened thus helping them make a smart financial move. Keep in mind the benefits of debt settlement, you may be out of debt in a few years and have saved close to half of what you currently owe. That is amazing when compared to where you will be if you stay on the creditors "credit treadmill" and pay them exorbitant interest and penalties over the course of decades through your monthly minimum payments.

I hope after reading this you now have a better understanding of debt settlement and the importance of retaining a New Jersey debt settlement law firm if you are in need of help.

Author's Bio: 

Steve Bis is a senior debt analyst and research assistant with Financial Solutions which helps New Jersey consumers get out of debt by structuring highly effective New Jersey Debt Settlement programs.