What Is Extinguishment of Debt?

Sarah Edwards | November 10, 2022

Legal Expert
Sarah Edwards, BS

Sarah Edwards is a professional researcher and writer specializing in legal content. An Emerson College alumna, she holds a Bachelor of Science in Communication from the prestigious Boston institution.

Edited by Hannah Locklear

Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Extinguishing your debt can feel like ^^

Summary: Extinguishment of debt is when a debt is resolved by either being paid off in full or reaching a debt settlement agreement. If you are being sued for a debt, you can reach a settlement by responding to the case with an Answer, making an offer, and getting all agreements in writing. SoloSettle takes care of all this and more for you.

Some days, your debt can feel like a burden that follows you wherever you go. Worse, debts from things like credit cards will only grow, depending on your interest payments. Your end goal is the extinguishment of debt, meaning your debt is gone. Here’s how settling your debt can lead to its extinguishment.

What does extinguishment of debt mean?

Cornell Law School defines extinguishment as “the cancellation of a legal right, interest, or contract.” Your debt is considered extinguished when it is paid in full and your creditor no longer has claim over you.

Some debts, of course, are designed to be carried long-term. These include such debts as:

Mortgage payments
Car payments
Student loans

But consumer debt, including credit card debt, should be extinguished as soon as possible. Otherwise, your debt can snowball, damaging your credit and disrupting your other financial plans.

Does a settlement extinguish my debt?

The most common way to extinguish your debt is to pay off that debt. But this isn’t always financially realistic, especially if your debt has gotten away from you.

Settling your debt can be an effective strategy to extinguish your debt while paying a lower amount than you originally owed. Most consumers who settle their debts can do so for around 45% less than the original amount.

Let SoloSettle do the work for you and reach a debt settlement with your creditor or debt collector.

Does extinguishment of debt hurt my credit?

Extinguishing your debt can actually help your credit under some circumstances.

Remember, you can extinguish debt by making regular, on-time payments, and making this a habit will generally raise your credit score. But if you get behind in your payments, you can expect your credit score to take a hit.

Paying the debt in full can minimize the damage, as credit bureaus look more favorably on your financial history when they see the words “paid in full.” But settling your debt is still better than ignoring it, and extinguishing your debt quickly can put you back on track, financially speaking.

Extinguish your debt through debt settlement

Having outstanding debt can be more than just a financial worry. Debt collection phone calls can seriously disrupt your life. But you can extinguish your debt quickly by settling. Here’s how to settle your debt in three simple steps:

File an Answer to any impending lawsuits.
Make an offer.
Get the agreement in writing.

Below, we break down each of these steps in detail. Don't like reading? Check out this video instead:

Step 1: File an Answer right away

If you’re being sued for a debt, you need to submit an Answer immediately. You’ll typically have as little as 14 days to submit an Answer to the court. Otherwise, you face a default judgment, leaving you responsible for the full amount.

Yes, file an Answer even if you’ve reached some sort of verbal agreement with your debt collector. This protects you in case they go behind your back and seek a default judgment without your knowledge.

Step 2: Make an offer

The next step is to make an offer. But first, you need to determine how much you can afford to pay.

So for example,let’s say you’ve looked at your budget and you can pay up to 80% of your debt amount now. If you owe $15,000, you can try offering to pay a lower amount at 60% of the debt, or to $9,000. Your collector may reject this and issue a counteroffer, but this opens you to negotiation.

To submit an offer, reach out to the debt collector or creditor via email or letter and say something like the following:

“Hey, debt collector man, I see you’re suing me for [$15,000] for [case number]. I don’t have that kind of money and I don’t agree with the amount. But I do have [$9,000] that I can pay within 30 days to settle the debt in full. Let me know if you accept.”

Don’t forget to check your spam folder so you don’t miss a response or counteroffer.

The great thing about SoloSettle is that we take care of all negotiating for you. We will reach out to the creditor or debt collector on your behalf and make an offer. Once an offer is accepted, SoloSettle also takes care of the rest by processing your debt payment for you.

This keeps your financial information private and prevents any sketchy charges from debt collectors.

All you have to do is figure out how much you can afford to pay to settle, and SoloSettle takes care of all the heavy lifting.

Step 3: Get the agreement in writing

Save everything. Your final settlement value should be in writing, which prevents your collector from reneging on the deal. Never send payment until you have this in writing. When you decide to pay, an agency like SoloSuit can help you make the payment without revealing any personal financial information.

Once you make your final settlement payment, you’re done, and your debt is officially extinguished.

Act fast

Debt is like a fire. The faster you extinguish it, the better off you’ll be. Make sure to respond quickly to debt collection phone calls and lawsuits, as this can give you a better negotiating position and streamline your journey toward financial recovery.

SoloSuit can file your Answer for you in all 50 states.

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.

Respond with SoloSuit

"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James

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>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate