I came across a short, but very interesting video from a Maryland bankruptcy attorney named Ron Drescher that made two very important points about debt negotiation. You can view the video here (and subscribe to Ron’s YouTube feed if you wish).
Ron makes two very important points about debt negotiation:
- First, when you enter into a negotiation with a bank to avoid a foreclosure or a judgment, you can expect that the bank will ask for any number of concessions from you. These concessions can range from waiving your right to future lawsuits, acceptance of a specific debt figure or even waiving local jurisdiction and agreeing that any future litigation between you and the bank will be tried in a court of the bank’s choosing – which may be hundreds or thousands of miles away.
I think it is fair to say that you are likely to get a much better result in this type of negotiation if you have the assistance of counsel.
- Second, do not promise more than you can deliver. You can be sure that the bank will position a negotiated settlement as a superior alternative to bankruptcy and you may find yourself considering terms that are simply not feasible. Sometimes, however, bankruptcy is a better solution to a negotiated settlement where the terms are too harsh. Here, too, counsel from a lawyer with perspective can be very helpful.
Earlier today I read a blog post from another thoughtful bankruptcy lawyer named Bret Nason who questioned the advice given by financial talk show personality Dave Ramsey that “bankruptcy is a life changing event that causes lifelong damage.” Bret correctly points out that in some instances, bankruptcy may make more sense than a negotiation, especially if the cost and complexity of negotiating with one or ten creditors is impossible.
The point here is that bankruptcy is not a one-size-fits-all solution nor is debt negotiation. When all is said and done, I think that you need to explore both bankruptcy and non-bankruptcy solutions with a legal adviser who you trust and decide which solution will help you and your family re-establish yourselves as savers and retirement investors.