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How to Settle a Debt Collection Lawsuit for Less

Sarah Edwards | December 02, 2022

What debt collectors want you to believe... ^^

Summary: If you’ve been sued for debt, it’s extremely important to respond to the lawsuit to avoid a default judgment. After you’ve made an initial response, you can reach out to the creditor or debt collector suing you to negotiate a debt settlement. Determine how much you can afford to pay off right now, then send a settlement offer for a bit less than that. After a few rounds of negotiations, you’ll likely reach an agreement. SoloSettle can help you settle your debt on your own and move on with your life.

Are you being sued for debt by a creditor or a debt collector? If so, you need to take action quickly to prevent a default judgment against you. If the court grants a default judgment, creditors and collectors can take harsh measures against you to collect the money owed, like garnishing your wages or freezing your bank account.

While judgments no longer appear on credit reports, people can find them through public records. If you need credit in the future or want to rent a home, the lender may search public records that will turn up prior judgments against you. If they find an open judgment, they’ll likely deny your application.

What should I do after I receive notice of a debt lawsuit against me?

The first step you’ll want to take is to file an Answer in response to the Complaint against you. An Answer prevents the judge from granting a default judgment without hearing you out. In your Answer, you’ll respond to each of the creditor's or debt collector's claims.

You should identify anything you believe to be incorrect in the Complaint and include it in your Answer. For instance, you may disagree with the amount you allegedly owe, or you may state that there is no relationship between you and a debt collector.

After you respond to all the claims against you, make sure to include your affirmative defenses too. This is where you get to tell your side of the story and list all the reasons you shouldn’t be held liable for the debt.

However you respond to the Complaint in your Answer, ensure your words are truthful. An Answer is a legal document, so you don’t want to say something that is outright false.

Your intention is to settle the matter before your court date. Nonetheless, an Answer ensures the debt collector can’t sneakily get their judgment while you’re trying to resolve the issue honorably.

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Resolve the claim before your court date

To avoid a judgment, you’ll need to address the issue before it goes to court. There are several ways to do so. You can either pay the debt in full before the court date or attempt to negotiate a settlement with the debt collector.

Paying the debt in full stops the lawsuit in its tracks. You’ve paid the obligation, so there’s nothing left to sue for. However, not everyone can fully pay a debt before the court date.

If you can’t pay the entirety of the debt before your court date, there’s still hope for avoiding a judgment. You can attempt to negotiate a debt settlement with the debt collector.

How does debt settlement work?

Debt settlement begins with an offer.

You must determine how much you are able to pay before sending a settlement offer. Perhaps you owe $2,000 and can afford to pay off $1,500 right now. If this is the case, start by sending a lower offer so you give yourself room to negotiate.

For example, you can start with an offer of 50% of the debt, or $1,000. Send a written communication to the creditor or collector, saying something like:

“I am offering a lump-sum payment of $1,000 to settle my debt from [lawsuit case number]. If you accept, please respond with a settlement agreement for me to sign. If you’d like to counter, please respond with the counteroffer amount. Please do not contact me in any other way than by responding to this message.”

Of course, you should include information relevant to your case, including the case number and the value of the debt.

There is a good chance your creditor or debt collector will make a counteroffer, but since you started low, you’ve given yourself room to increase the offer amount and eventually reach a settlement.

It’s not uncommon to undergo several rounds of negotiation before reaching an agreement. Be patient, and stick to your guns if the debt collector won’t budge.

Sometimes, explaining why you can’t afford to pay the total value of the debt can help your efforts. Tell the debt collector if you’re experiencing severe financial issues, like job loss or caring for an aging parent. They may be more willing to work with you if they understand your circumstances.

Send a debt settlement offer with SoloSettle.

Check out this video to learn more about how to settle your debt:

Get the debt settlement agreement in writing

After reaching an agreement with the debt collector, make sure to get it in writing. The contract can protect you if the debt collector decides to start their collection activities again.

Here’s an example of a debt settlement agreement.

You should also comply with the terms of the agreement. Pay the debt collector the settlement amount in accordance with the deal. If you pay the amount due late, they can rescind the contract and possibly start another lawsuit against you.

Now, let's take a look at an example.

Example: Kyle is being sued by LVNV Funding for a credit card debt of $5,000 after losing his job and falling behind on payments. Kyle uses SoloSuit to draft and file an Answer to the lawsuit with the court. After looking over his budget, Kyle decides he can pay off $4,000, or 80% of the debt. SoloSettle helps Kyle start the settlement process by sending an initial offer of $2,500 to LVNV Funding who counteroffers. After a few rounds of negotiations, they reach a debt settlement of $3,800. Kyle get the settlement agreement in writing and pays off the settlement amount as listed in the contract.

Take care to avoid further legal issues with debt collectors by paying your bills on time. If you can’t afford to pay them, try to come to a payment arrangement to avoid the stress of a debt lawsuit.

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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