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Should I Settle My Debt?

Sarah Edwards | November 30, 2022

Settling a debt can be a very good thing.

Summary: Dealing with a debt lawsuit can be a scary prospect. However, you have options, including settling the debt before your court date. SoloSettle can help you.

Everyone makes mistakes, and everyone runs into problems beyond their control. You might fall into debt due to a bad decision or two or an unexpected crisis, like losing a job or going through a divorce. Regardless of the reasons for it, owing money you can’t afford to repay is one of the hardest challenges you’ll face.

If you’re in debt, it’s time to address the problem and explore your options. For example, you can try to set up a payment arrangement or settle your debt. Let’s explore both choices.

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How does a payment arrangement work?

Payment arrangements require you to make a monthly minimum payment until you repay your obligation.

Consider an example.

Example: Jane owes a balance of $15,000 in medical debt. She works directly with the hospital to create a payment arrangement. In this arrangement, she’ll be responsible to pay $250 towards her debt per month until her debt is paid off in full.

A payment arrangement is advisable if you don’t have enough money to settle your debt before it is due. The small monthly payments will be for an amount you can afford. In the meantime, you can build up your savings and avoid falling further into debt.

By setting up a payment arrangement, you can fend off a potential lawsuit. If you keep up your payments following the agreement, the creditor won’t be able to start legal action against you.

It’s a good idea to open a dedicated savings account for the debt while making regular payments. If you don’t have much disposable extra income, try earning extra money through a part-time job or side hustle. All of the additional cash from your job should go toward saving to repay the debt.

If your original creditor has charged off your account, a collection agency will attempt to collect the money from you. You’ll need to make a payment arrangement with the agency instead of your original creditor.

Dealing with the threat of a debt collection lawsuit? Use SoloSuit’s Answer form to respond today!

Settling your debt can help you save

On average, consumers are able to reach a debt settlement of 50% of their original debt amount when working with a debt settlement company. This allows them to save big time while resolving their financial obligations.

While 50% is possible, don’t count on reaching a settlement of that amount. However, there is a really good chance you will be able to cut the debt amount down and reach an agreement to pay off a portion of your debt as a lump-sum payment.

Beware, there may be certain repercussions to settling a debt such as taxes and changes to your credit score.

That being said, settling a debt is still the best option because of the peace of mind it can bring. Once you’ve paid off your debt, you can focus your efforts on improving your finances in other areas.

Settle your debt for less with SoloSettle.

Start the settlement process with your creditor

If you have enough savings to pay off a significant portion of your debt, you can try to settle with your creditor or a collection agency. You’ll have a better chance of success if you have saved at least 60% of the value of your debt. For example, if you owe $3,000, you should have at least $1,800 in savings.

Start by determining how much you can afford to pay in a lump-sum and how much the creditor will be likely to accept. Then, send a settlement offer to the creditor. The offer may sound something like this: :

“Hey, debt collector man, I see you’re suing me for [$3,000] for [case number]. I don’t have that kind of money and I don’t agree with the amount. But I do have [$1,800] that I can pay within 30 days to settle the debt in full. Let me know if you accept.

Once you send your initial offer, wait for your creditor to respond. It may take a few days for them to decide whether your offer is accepted or if they’d prefer to counteroffer.

If they counteroffer, carefully read the terms before accepting the agreement. Don't hesitate to tell them if their settlement offer is more than you can afford. Sometimes, if a creditor understands you have a financial hardship, they’re more willing to provide you with favorable terms.

Send a settlement offer to your creditor or debt collector.

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

What should I do after I have a settlement agreement with my creditor?

After you make a deal with your creditor, get it in writing. A written agreement protects you from the creditor going back on their word and attempting to collect the remaining balance.

You need to ensure you fulfill the terms of the agreement. Make sure you pay the settlement amount by the due date. If you don’t make your payment on time, your creditor may cancel the deal, and you’ll need to start over from scratch.

Be wary of giving your creditor your bank account information. Debt collectors sometimes debit accounts unexpectedly. You don’t want to give them too much access to your account. Instead, send your payment via check.

Your creditor does not have to accept a settlement offer

Your creditor is under no obligation to accept your settlement offer. They can hold you responsible for the entire debt without giving you any leniency.

However, if you show signs of being unable to repay your debt, they will be more willing to accept a settlement offer. The creditor knows it’s better to take what you have available than to risk non-payment for the entire amount.

If your creditor doesn’t want to accept a settlement agreement, it’s not the end of the world. Pay the amount you saved for settling the debt to the creditor, and try to make larger monthly payments.

With time, you’ll pay off the obligation and can break free from the chains of debt. When you do, avoid getting into the same trouble with other creditors. Minimize the amount of debt you carry and adopt healthier financial habits.

Respond to a debt collection lawsuit

Being sued for debt sucks. SoloSuit can help.

If you’ve been sued by a debt collector, the most important step to take is to respond to the lawsuit within your state’s deadline. If you don’t, you’ll lose by default judgment, giving the collector rights to garnish your wages and seize your property.

Responding to a debt lawsuit is easier than you might think. With SoloSuit, all you have to do is respond to a few questions about your lawsuit, and our software generates a legal Answer document for you that is customized to your case.

When you make an Answer to your debt lawsuit, follow these three steps:

  1. Respond to each claim against you.
  2. Assert your affirmative defenses.
  3. File the Answer with the court, and send a copy to the opposing attorney.

SoloSuit can help you draft and file an Answer in all 50 states. Check out this video to learn more:

Keep in mind that you can reach out to settle a debt at any stage in the debt lawsuit process. That being said, it is wise to file an Answer into the case first so that you avoid having the debt collector go back on their word and request a default judgment against you.

Use SoloSettle to settle your debt at any stage of the debt collection lawsuit process.

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.

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