If you’re facing a debt lawsuit in Arkansas, you’re probably wondering how to avoid going to court. You can settle a debt at any stage of the debt lawsuit process. Be sure to respond to the lawsuit, submit a settlement offer to start negotiations, and get the settlement agreement in writing.
Many Americans have multiple debts, including credit cards, car loans, and mortgages. With all those obligations, it’s easy to stay caught up.
When consumers can’t pay back their debt, their creditors may decide to sue them. It’s possible to get a judgment if a debt collection lawsuit succeeds. A judgment allows the creditor to take more severe actions against a consumer, like garnishing their wages or freezing their bank accounts.
You can try debt settlement if you’re facing a debt lawsuit in Arkansas and can’t pay it back. A debt settlement lets you settle the debt for less than the total value, avoid a judgment, and stop collection attempts.
To settle a debt in Arkansas, follow these 3 steps
You’ll need to follow three steps to settle a debt before your court date.
- Provide an answer to the debt lawsuit.
- Start the settlement negotiation process with an offer.
- Make sure you have a written settlement agreement.
1. Provide an answer to the debt lawsuit
When a creditor begins the legal process against you, they’ll file a Complaint with your local court and send a copy to you. In addition to stating the reason for the lawsuit, the Complaint should also show the total value of your debt and fees incurred.
You should still file an Answer to the Complaint even if you plan to settle your debt. The Answer is your defense against the lawsuit and prevents the judge from granting a default judgment.
When you receive a debt lawsuit in Arkansas, you have 30 days to respond and avoid a default judgment. If you fail to react in time and attempt to settle the debt fail, you can’t be protected from the lawsuit. Answers can be used to argue that you don’t have a business relationship with the creditor or that they need to validate your debt correctly.
2. Start the settlement negotiation process with an offer
The next step is to make an initial offer to your creditor or debt collector.
If you can afford it, you should collect at least 60% of the debt’s value in a settlement. Identify your savings and any money coming in over the next few weeks.
For instance, if you owe $5,000, you might start by offering $3,000 to settle. If that amount isn’t realistic, consider selling some things you no longer need.
The debt collector may not accept your first offer. They’ll probably counter with an offer of their own. Sometimes, negotiations can go through several rounds before you reach an agreement.
Don’t accept any offer you can’t afford to repay. If you do and you don’t fulfill your obligations, the creditor will likely restart the legal process against you.
3. Make sure you have a written settlement agreement
Ensure you get the settlement agreement in writing before transferring your payment to the creditor. This will ensure that you and your debt collector have a record of the deal and its terms.
It should specify how much you’ll repay, how you’ll pay it, and when it’s due. It should also stipulate that the settlement waives any right the creditor has to pursue you for the remaining balance.
You can prepare the contract before the settlement and fill in the relevant information once you have a deal. It is better that you ask your creditor to notarize the agreement. Legal witnesses must sign the contract to protect you if the creditor backs out.
To understand how debt settlement in Arkansas works, let’s look at an example.
For example, Elaine receives a notice that she is subject to a debt lawsuit. She owes Barclays $2,000 for an old credit card she has forgotten about. Unfortunately, Elaine does not have the money to pay Barclays, but she is determined to avoid a judgment at any cost. As a first step, Elaine responds to the lawsuit by drafting an Answer, which she sends to the creditors and her local Arkansas court. She then offers Barclays a settlement of 60% of the debt for $1,200 as a next step. She transfers the money to Barclays after obtaining a signed settlement agreement. Once Barclays receives the money, it drops the case against her and reports her account settled.
How does Arkansas handle debt collection and debt settlement?
In Arkansas, creditors and debt collectors are forbidden from harassing or abusing debtors under the Fair Debt Collection Practices Act (FDCPA). The FDCPA prohibits creditors and debt collectors from harassing or using debtors. Specific actions include:
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- Early morning or late night calls.
- Repeatedly contacting a debtor throughout the day.
- Contact people the debtor knows and inform them of the debt.
- Contact someone at work if they’ve requested it not be done.
- Threatening the debtor with jail if they don’t pay.
For nonpayment of debt, Arkansas also has a statute of limitations that limits the time a creditor can sue.
AR Code 16-56-111 (2017) gives creditors five years to pursue debts from written contracts. AR Code 16-56-105 (2010) limits legal action for oral debts to three years, and AR Code 16-56-106 (2010) caps the collection of medical debts to two years.
Additionally, by amending the Telemarketing Sales Rule, the Federal Trade Commission expanded debt settlement regulations to all debt relief organizations and companies. This Rule applies to all 50 states, including Arkansas, regarding debt settlement practice.
As a result of the new Rule, debt settlement companies cannot:
- Debt settlement companies cannot charge upfront fees before the debt has been effectively settled.
- Consumers need to be made aware of certain services before enrolling. There are several important terms to consider, including the cost of the service, the duration of the service, how much money must be saved before the consumer gets a settlement offer, the consequences if the consumer does not pay on time, the customer’s rights, etc.
- A debt settlement company cannot make false or unsubstantiated claims about its services.
How should I contact my creditor for debt settlement?
Email is the best method for starting the debt settlement process since it is quick and provides a written record.
It’s also possible to call your creditor or debt collector. If you do this, you should record the call to refer to it if the creditor reneges on your settlement.
Under AR Code 5-60-120, only one party must consent to a phone call recording. You will give your consent.
Arkansas debt settlement FAQs
Here are some of the most common Arkansas debt settlement questions.
How much debt should you settle?
A debt settlement is more likely to work if you offer your creditor 60% of your debt. If you cannot afford that, show what you can. It will be up to your creditor to determine whether or not to accept your offer.
Is it possible to settle my debt on my own?
The process of debt settlement is entirely possible for you to handle yourself. Before you do, learn as much as you can.
Paying off or settling a debt is better?
In general, it’s better to pay off your debts rather than settle them. Paying off your debt will benefit your credit score and report. However, settling your debt can protect you from legal action.
Arkansas offers debt settlement services
It is still possible to settle your debt before your court date. File an Answer to your creditor’s Complaint and begin the negotiation process. Make sure to get your agreement in writing before transferring any funds.
It is essential to act quickly because the agreement’s details may change over time, and the parties may only be able to resolve if the terms are agreed upon slowly. A written contract will ensure that both parties understand and agree to the same terms and that potential disputes can be resolved quickly and effectively.