Sarah Edwards | December 01, 2022
Summary: Thinking about rejecting a settlement offer? You may want to make a counteroffer. If you reject a settlement offer, or fail to keep up with a payment arrangement, your creditor might take you to court. Learn what you need to know about settling a debt and responding to a debt lawsuit from SoloSuit.
Have you received a settlement offer from a creditor or debt collection agency? If so, you have a choice to make. You can accept the offer, counter with an offer of your own, or ignore the communication.
Typically, debt collectors and creditors make a settlement offer when someone seems to have difficulty repaying a debt.
For example, if you suddenly stop making payments on a loan, the creditor will worry that you’ve lost your job or have other financial problems.
Your creditor might attempt to get you back on the right financial track by offering you a new payment arrangement or a settlement. Once you receive the offer, the ball is in your court, and you must decide your next steps.
If you can’t afford to pay your creditor the settlement they offer you, you’ll need to reject it. Just like you wouldn’t buy a home well outside your mortgage parameters, you shouldn’t agree to a settlement you know you can’t pay.
However, you can make a counteroffer instead of rejecting the settlement outright. For instance, suppose that your creditor offers you a settlement for a lump-sum payment of 75% of the value of your debt. You could counter with an offer you can better afford, like 45% of the debt. Your creditor will then decide whether to accept your offer or counter with another offer.
Let’s take a look at an example.
Example: Jason is being sued by a debt collector for a credit card debt of $4,000. At the moment, Jason can afford to pay off $3,500 in a lump-sum payment. He responds to the lawsuit with a SoloSuit Answer document. Then, he uses SoloSettle to send a debt settlement offer, asking the debt collector to settle for $2,000. The collector sends a counteroffer, and the two parties negotiate until they reach a settlement of $3,200. Jason saves money and avoids having a judgment entered against him in court.
If you can’t reach a settlement agreement with your creditor, they’ll likely stop the negotiation process. Instead, they may offer a monthly payment arrangement that doesn’t require as much up front from you. They may offer low monthly minimum payments until you repay the debt.
Consumers who can’t afford to settle with their creditors should accept a payment arrangement. A payment arrangement protects you from a lawsuit while also giving you time to save more money toward a settlement.
If possible, pay double or triple the amount of your minimum payment to eliminate the debt quicker. Taking on a short-term, part-time job or starting a side hustle can help you bring in some extra income. Put as much money as you can toward your debt repayment.
If you don’t stick with your payment plan, your creditor may tire of trying to accommodate you. They may decide to pursue the debt through a lawsuit. If they begin a legal claim against you, you’ll need to repay the debt or settle with them to avoid a judgment.
A judgment will allow your creditor to take specific actions against you, including garnishing your wages, freezing your bank account, or seizing certain assets. An open judgment can prevent you from obtaining new credit or finding a new job. It’s best to avoid a judgment if at all possible.
Yes, you can attempt to defend yourself from a judgment in court. However, you’ll need to show the judge why you don’t owe the debt or why the claim doesn’t apply to you.
To start your defense, you’ll need to reply to your creditor’s Complaint with an Answer.
Sometimes, people don’t find out about debt until they receive notice of a lawsuit. In that case, they may be a victim of identity theft. Identity theft victims should file complaints with the FTC and their local police precinct.
You’ll need to file your Answer following your local court’s rules. You should also send a copy of the Answer to your creditor.
On your court date, you’ll appear before a judge to answer questions and present your case. The judge will decide whether a judgment is appropriate or not. If you win the case, you’ll avoid further legal claims from your creditor.
SoloSuit can help you draft and file an Answer in all 50 states.
Check out this video to learn more about what to include in your Answer to a debt collection lawsuit:
If your creditor wins a judgment against you, they’ll typically take immediate action to garnish your wages or freeze your bank account. If the creditor garnishes your wages, you’ll lose a portion of your income until you fully repay the loan.
Consumers who receive a judgment for a loan with collateral, such as a car, will likely lose the vehicle. The court’s decision will allow the creditor to seize any assets used as collateral.
It’s always best to avoid judgments involving loans and creditors. Doing so eliminates the potential for future financial headaches and legal issues.
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.
Here's a list of guides for other states.
Being sued by a different debt collector? Were making guides on how to beat each one.
You can ask your questions on the SoloSuit forum and the community will help you out. Whether you need help now are are just look for support, we're here for you.
Is your credit card company suing you? Learn how you can beat each one.
Need more info on statutes of limitations? Read our 50-state guide.
Need help managing your finances? Check out these resources.
Out Debt Validation Letter is the best way to respond to a collection letter. Many debt collectors will simply give up after receiving it.
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