If you are being sued for unpaid debt in Colorado, you might wonder if you can settle the claim before your court date. The first step is to respond to the debt lawsuit with an Answer, then send your initial settlement offer to begin negotiations, and then get the settlement in writing once it has been reached.
Most Coloradans are paying back a personal loan, medical, or credit card debt. However, staying on top of your obligations can be difficult if you get too caught up in debt.
Creditors take notice when you stop paying your bills. They may contact you and send you letters. If you do not resume your payments, they may charge off your account, sell it to a collection agency, or file a lawsuit against you.
The fact that you are being sued for debt is no laughing matter. Luckily, you have resources to help you fight back and win in court. Debt settlement is one such resource.
We will discuss everything you need to know about how to settle a debt in Colorado and what it is like to work with a debt settlement agency.
To settle a debt in Colorado, follow these three steps
If you are the subject of a debt lawsuit, your creditors may file a judgment against you, which allows them to garnish your wages or freeze your bank account. A judgment remains on the public record and will be available to future employers and creditors searching for it.
It is in your best interest to avoid a judgment at all costs. You can defend yourself against the lawsuit and repay or settle the debt before the court date.
To settle your debt in Colorado, you must understand the process. Here are the three steps:
- You need to respond to the debt lawsuit with an answer.
- Offer a settlement to begin the negotiation process.
- Make sure the settlement agreement is in writing.
We will examine each of these steps in greater detail below
1. You need to respond to the debt lawsuit with an answer
Creditors or debt collectors initiate a debt lawsuit when they file a Summons and Complaint (also known as a Petition or Warrant of Debt in some states). In most cases, a Summons is merely an official notice of the lawsuit; a Complaint, on the other hand, outlines the reasons for the suit, including nonpayment of debt. Furthermore, it stipulates the total value of your debt, including interest and penalties.
Answers to the Complaint should be provided as a legal response. You intend to settle the claim before your court date, but an Answer will protect you if your efforts are unsuccessful. Your creditor will not be able to ask the judge for a default judgment; instead, they will have to hear your side of the story.
As part of the Answer, you will provide reasons why the legal claim against you is unreasonable, such as improper validation of the debt or a lack of a business relationship with the debt collector. Search for another defense if neither of those is appropriate for your claim.
To avoid losing by default judgment in Colorado, you have 21 days to respond to a debt lawsuit. To give yourself time to negotiate a settlement, respond before the deadline.
2. To begin negotiations, make an offer
Determining how much you can afford to pay on the debt is essential. Evaluate your upcoming paychecks and your savings account. If you have little money to put toward the settlement, consider taking on a few odd jobs or asking friends and family for assistance.
When you have calculated how much you can pay, you should do some research on your creditor or debt collector. Determine what they might accept as an offer. Here are some questions to ask:
- What is your debt? Is it a signed promissory note?
- Do you believe that there is a meritorious defense?
- Does your debt have any offsets?
- What is the interest rate on your debt?
- Do you have a fee-shifting provision associated with your debt account? Fee-shifting provisions require the borrower to pay the cost of collection.
- How long has it been since you last made a payment on the account?
- Does the original creditor own the debt, or has it been assigned to another party?
- Do you have a federal or state loan program or a private loan?
- What type of debt do you have? Is it secured?
- Can you discharge your debt in bankruptcy?
- Do you have student loan debt?
How you answer these questions will significantly affect how much your creditor or collector is willing to accept as a settlement.
The average consumer receives a settlement of 50% of their original debt amount when working with a debt settlement company; however, this is only sometimes the case. Even 60% is more likely.
After determining how much you can afford to pay back and what is likely to be accepted, you should send an offer. Consider starting at 60% of the debt value. The creditor or debt collector will then determine whether a judgment will be worthwhile or if a lump-sum payment will be more cost-effective.
Don’t accept any offer that you cannot afford to repay. If you buy and fail to make your payment, your creditor will continue the lawsuit against you — and probably win.
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3. Make sure the settlement agreement is in writing
Your settlement agreement should be in writing. This ensures that both you and your creditor understand the terms of the contract, including the amount you will pay, when it is due, and how it will be transferred.
Your contract should state that your payment resolves the debt. Your creditor cannot pursue you for the remaining balance via a legal claim, and they will cease further collection efforts.
The agreement should be provided with a notarization section for both parties. Notarizing the agreement ensures there are witnesses to the contract and provides an additional layer of legal credibility.
If the creditor or collector drafts the settlement agreement for you, review it carefully before signing.
Let’s walk through an example of debt settlement now that you understand the steps involved.
An example would be Kayla receiving a subpoena for a debt lawsuit brought by XYZ Financial, her creditor. As a result of the financial difficulties she ran into last year, she stopped making payments on a personal loan. XYZ Financial has filed an Answer with the court alleging that XYZ Financial has not validated the remaining balance of the loan.
The remaining balance is $2,000. As a next step, she decides to negotiate a settlement with XYZ Financial for approximately 60% of the loan’s value, or $1,200. XYZ Financial considers Kayla’s offer and counters $1,400. Kayla agrees to the settlement and drafts a settlement agreement. As soon as the contract has been signed, Kayla will transfer the funds. XYZ Financial drops the lawsuit against her and reports the settlement to the credit reporting agencies.
Debt collection laws and debt settlement laws can protect you
A recent amendment to the Telemarketing Sales Rule has expanded debt settlement regulations to all debt relief companies and organizations. This Rule governs debt settlement practices in all 50 states, including Colorado.
As a result of the new Rule, any company providing debt relief services, such as debt settlement companies, is prohibited from:
- Fees should not be charged upfront. Consumers can only be charged fees once their debt has been effectively settled or resolved.
- Failure to disclose certain information about its services to consumers before enrollment. There are many important terms to consider here, including the cost of the service, the length of time it takes to see results, the amount of money to save before a settlement offer can be made, the consequences if the consumer fails to make payments on time, the customer’s rights, etc.
- False or unsubstantiated claims regarding a debt settlement company’s services are prohibited.
Moreover, Colorado adheres to the Fair Debt Collection Practices Act (FDCPA), which prohibits creditors and debt collectors from taking the following actions against debtors:
- Getting in touch with a debtor before 8 a.m. or after 9 p.m. regarding an obligation.
- Threatening a consumer with jail time if they fail to repay a debt.
- Contacting a debtor at their place of employment unless the debtor requests not to be contacted.
- Repeatedly calling a debtor or calling more than seven times a week.
- The use of threatening or obscene language to collect a debt.
Aside from the FDCPA, the Colorado Fair Debt Collection Practices Act also limits the actions of debt collectors. The law prohibits debt collectors from:
- To collect a debt, threaten to use violence.
- Publicize a list of consumers who refuse to pay their debts.
- Falsely represent themselves as representatives of the government.
- Accuse the consumer of committing a crime.
- Send a postcard to the debtor regarding the debt.
CO Rev Stat 13-80-101 (2016) governs the validity of oral and written contracts, with a statute of limitations of three years. CO Rev Stat 13-80-103.5 (2016) limits the collection of debt on accounts to six years.
Which debt settlement company is best?
National Debt Relief
It is one of the nation’s largest debt settlement companies. To qualify, clients must have $7,500 in unsecured debt. National Debt Relief will work with them to settle their debts. Programs last between two and four years.
Freedom Debt Relief
As one of the larger debt settlement companies, Freedom Debt Relief has assisted thousands of consumers in resolving their debts through settlement since 2002. To qualify for debt settlement, consumers must have unsecured debts worth a minimum of $7,500. Fees vary from 15% to 25% of the settlement value.
how to contact a creditor
To begin the debt settlement process, you can contact your creditor by email, phone, or letter.
Email is recommended since it is fast, convenient, and verifiable. You will be able to carefully consider each message from your creditor before responding.
A phone call, however, can expedite the debt settlement process if you have little time. If your creditor is willing to negotiate, you can usually resolve your debt in under an hour.
Whenever you call your creditor, it is recommended that you record the conversation. Under Colorado Revised Statute 18-9-303, you may record your telephone conversation with your creditor without their knowledge.
Colorado debt settlement FAQs
Here are a few questions about Colorado debt settlement.
Should I settle my debt for a certain percentage?
You should offer at least 60% of the total value of your debt. Your creditor can tell you that you are serious about resolving your debt. If you cannot afford 60%, please explain your financial situation and offer what you can. Your creditor may be willing to accept a lesser amount if you can show what you can.
In Colorado, when does a debt become uncollectible?
The statute of limitations for oral and written contracts is three years, while the statute of limitations for debts on the account is six years. When your debt exceeds this limit, creditors cannot file a lawsuit against you. However, they may report your account to the credit bureaus, send you letters, or call you.
Do you think it’s better to settle a debt or to pay it off?
Repaying your debt keeps you on good terms with your creditors and improves your credit rating. You should make every effort to repay your debt. If you face a debt lawsuit or extenuating financial circumstances, settling your debts can help you resolve the issue and avoid a judgment.
The solution to a debt lawsuit is debt settlement
If you’re facing a debt lawsuit, you’ll want to settle your creditor’s claim before it becomes a potential judgment. Contact your creditor and negotiate a settlement you can afford. Make sure to get the agreement in writing before transferring any money.