If you fail to make payments on an obligation in Illinois, your creditor may take legal action against you. However, it is possible to settle your debt before going to court. Please ensure that you file a response to your lawsuit, submit a settlement offer to kick off negotiations and that the settlement agreement is in writing.
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We all have debt. Credit cards, medical bills, and mortgages are common occurrences. Sometimes, debt can spiral out of control. If you lose your job or experience an unexpected expense, you may not be able to meet your obligations.
Your creditor will begin contacting you once you stop making payments. They will send you numerous phone calls, letters, and emails. If their attempts do not succeed, they will turn your account over to a collection agency or take legal action against you.
If you are the subject of a debt lawsuit, you may wonder how to avoid a judgment. The best way to avoid a judgment is by paying the debt in full. However, if you cannot pay the debt in full, you may attempt to settle the debt for a percentage of what you owe.
This article will explain how you can settle a debt in Illinois by paying a lump sum in exchange for losing the lawsuit and other collection activities.
Illinois debt settlement steps
The process of debt settlement can be broken down into three simple steps.
- Respond to the debt lawsuit with an Answer.
- Make an offer to start the negotiation process.
- Make sure the settlement agreement is in writing.
1. Answer The Debt Lawsuit
Typically, a debt lawsuit begins when a creditor or debt collector files a Summons and Complaint, stating the reasons for the lawsuit, such as failure to repay an obligation. You will also be notified of all specific allegations against you in the Complaint, including the amount you owe and any penalties or interest you may incur.
The Illinois Supreme Court allows you 30 days to file an Appearance and Answer in response to a debt lawsuit. These documents indicate to the court that you intend to fight back.
Several common defenses are used in debt collection cases, such as insufficient validation of the debt, a lack of business relationship between you and the plaintiff, or an expired statute of limitations.
If you do not respond within the deadline, you may automatically lose the case when the court issues a default judgment against you. With a default judgment, creditors and debt collectors can garnish your wages or even seize your assets.
Therefore, even if you intend to settle the case, you will still need to file an Answer to avoid a default judgment if your efforts to resolve the claim prove unsuccessful.
2. Start the negotiation process by making an offer
To determine how much to offer in a settlement, you should decide how much you can afford. The amount of 60% of the total value of your debt is sufficient to demonstrate your seriousness regarding the settlement process. The offer will be weighed by creditors and collectors and determined whether it is worthwhile to settle.
It is possible to obtain money by selling things you don’t need in your house, taking on odd jobs, or asking for a loan from family and friends if you cannot pay 60% of the total amount owed on your debt.
A person in an extenuating financial situation should inform creditors of their condition. If the creditor is aware of the problem, they may be more lenient and accept a lower offer.
There may be several rounds of negotiation before you settle. Your creditor or debt collector may counter your offer with one they believe is more appropriate.
Don’t accept an offer that is beyond your means. If you fail to repay, the creditor will file a lawsuit, and they will likely win.
3. Make sure the settlement agreement is in writing
Ensure that the terms of the agreement are in writing before sending any money. A written contract ensures understanding and that the conditions are fully understood.
You should include in your settlement agreement the amount you will repay, when it is due, and how it will be sent to your creditor.
Once the creditor receives your payment, they should waive their right to the remaining balance. The creditor cannot take any further legal action and will be required to report your account settled to credit reporting agencies.
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To expedite the process, you can prepare a settlement agreement in advance. Once you have agreed with your creditor, you will insert the necessary information and send it.
If you would like to have a notary witness the agreement, it is recommended that you do so. The creditor can’t rescind a notarized contract.
The following is a hypothetical example of debt settlement in Illinois, which illustrates the steps of the debt settlement process.
For example, Tom receives a subpoena for IC System’s debt lawsuit against him. In the Complaint, it is claimed that Tom owes IC System $3,000 for unpaid debts. However, Tom needs the funds to repay IC System before his court date. To resolve his debt with IC System, Tom files an Answer within 30 days of filing the case and then offers to settle the debt for $1,800 (60% of the debt’s value).
The IC System counters with an offer of $2,000, which Tom accepts. IC System sends Tom a written agreement, which both parties sign with a notary present. When IC System receives the compensation, it drops the lawsuit against Tom and reports the settlement to the credit reporting agencies.
Illinois debt collection and debt settlement laws
The Illinois Collection Agency Act 225 ILCS 425/1 prohibits debt collectors from taking the following specific actions against consumers:
- Arresting or criminally prosecuting a debtor without justification
- False information that adversely affects the reputation of a debtor
- Providing a public listing of the outstanding debt of the consumer
- Fraudulently representing the debtor’s obligations
- Providing information about a disputed debt to individuals with no business interest in the matter
Additionally, Illinois adheres to the Fair Debt Collection Practices Act (FDCPA). The FDCPA prohibits creditors from taking abusive actions against consumers, such as:
- Threatening someone with jail if they do not repay their debts
- Getting in touch with a debtor before 8 a.m. or after 9 p.m.
- Calling the debtor at work when the individual requests that they do not do so
- The act of identifying oneself as someone they are not, such as an agent of law enforcement
According to Illinois law, a creditor has a limited period to pursue collections activities against a debtor. There is a 10-year restriction under 735 ILCS 5/13-206 for written debts, while 735 ILCS 5/13-205 limits lawsuits regarding oral obligations to five years.
Additionally, Illinois has specific regulations concerning debt settlement. Under 205 ILCS 665/3, all organizations that provide debt settlement services must be licensed by the state. As defined in 205 ILCS 665/12, debt settlement agencies are prohibited from charging more than $50 for each counseling session and $50 per month for additional customer services.
The Debt Settlement Protection Act, 225 ILCS 429, further limits the fees that debt settlement companies can collect for their services. By 225 ILCS 429/125, debt settlement agencies cannot charge consumers more than 15% of the consumer’s savings.
For example, the debt settlement agency can only charge you $75 (or 15% of the savings) for their assistance if you enroll with a licensed debt settlement agency in Illinois and save $500 by settling a debt.
How do I choose the best debt settlement company?
Here are some debt settlement companies you might like:
- People who participate in National Debt Relief’s programs can save an average of 50% of their debt, making them one of the best debt settlement companies in the U.S. A consumer must have at least $7,500 in debt to qualify. The company charges between 15 and 25% of the total value of its debt.
- The Accredited Debt Relief Program assists consumers with multiple outstanding obligations to resolve their debts. The programs usually last two to four years and cost 15 to 25% of the total debt. Individuals qualified for the program can significantly reduce their debts.
- Another debt relief company that is popular with customers is Century Support Services. Since 2012, this company has assisted customers with more than $1.7 billion in debt. Century Support Services charges a fee of 18% to 25% depending on how much debt the client seeks to settle.
How do I contact a debt collector?
When you are ready to begin the settlement process, you can contact debt collectors through email, letter, or phone call. However, you should know the pros and cons of each method of contact.
Email is recommended as it is quick and provides a written record of your conversation with the debt collector. Before responding, you will have the opportunity to consider the communication. Mail is also an option, but it takes much longer, and it is common for documents to get lost or misplaced during transit.
For added protection, you should also record the conversation if you communicate over the phone. It would help if you determined what you can afford and any non-negotiable terms before you speak with someone.
Your responsibility is to ask your debt collector to consent to the recording of the call. By 720 ILCS 5/14-2, all parties must agree to the recording.
Illinois debt settlement FAQs
The following are some of the most frequently asked questions about Illinois debt settlement.
How much debt should you offer to settle?
It would help if you offered your creditor what you can afford to pay in a debt settlement. If you cannot pay 60%, show what you can and explain your financial circumstances to the debt collector. If they understand your situation, they may grant you some leeway.
When does Illinois debt become uncollectible?
According to Illinois law, your creditor can pursue legal action against you for up to ten years for written agreements and five years for oral contracts. If your debt is past the statute of limitations, debt collectors can continue to contact you, but they cannot file a lawsuit against you.
Paying off or settling a debt is better?
Repaying a debt in full is better than settling it. When you repay your debt in full, your creditors will report it to the credit bureaus as paid in full. However, fixing your debt can resolve the matter and save you from being sued.
Avoiding a judgment is possible with debt settlement
Facing a debt lawsuit can be challenging, but debt settlement can help you get through it if you follow the steps in this article. You must also make sure you get your agreement in writing.
Debt settlement is a process by which you negotiate with your creditors to reduce the debt you owe. By getting the agreement in writing, you can ensure that the settlement terms are legally enforceable and that you will not be held liable for any additional amounts.
