When keeping up with monthly payments becomes difficult, debt settlement can be an effective method of getting out of debt. Millions of consumers have benefited from this method to avoid becoming further indebted or facing bankruptcy.
An individual or company settles a debt and pays a creditor or debt collector a significant percentage of what they originally owed, either directly or through a debt settlement firm. If you make the payment, the debt will be marked as paid, and any pending lawsuits will be withdrawn.
This article explains how to settle a debt in Kentucky, including state-specific laws and timelines.
Let’s get started.
To settle a debt in Kentucky, follow these three steps

Creditors and debt collection agencies in Kentucky often welcome debt settlement agreements for delinquent accounts. If your financial situation makes paying the total amount nearly impossible, they may also agree to settle. Follow these steps if you have been sued for a debt in Kentucky before going to court:
- It is important to respond to a debt lawsuit.
- To begin negotiations, offer a debt settlement.
- There should be a written settlement agreement
1. It is important to respond to a debt lawsuit
Answers are legal documents defendants must send when sued. Even in debt collection cases, the accused must respond to the allegations in the complaint. Under Kentucky law, there are three ways to answer: admit, deny, or deny due to ignorance.
The next step is to list your affirmative defenses. If the creditor rejects your settlement offer, you can use these reasons to protect your case. Furthermore, these defenses can weaken the creditor’s case, and they may prefer to settle than risk losing in court. Ensure you enter all the crucial information in the lawsuit and attend to other requirements.
The Kentucky Rules of Civil Procedure 12.01 provide that you have 20 days to respond to a debt lawsuit with an answer. A default judgment may be entered against you if you fail to comply.
A creditor or debt collector may seize your wages and property if you default. Because of this, you should always respond to a debt lawsuit, even if you plan to settle the debt.
2. To begin negotiations, offer a debt settlement
Following the successful submission of the Answer, determine which approach is most appropriate for negotiating a settlement. Do you wish to settle your debt on your own, or do you want to hire a debt settlement company? Consider these two factors when deciding which option to choose:
- Calculate your ability to pay off: Debt settlement requires you to have a certain amount saved up. To accumulate enough money for the settlement, cut back on your expenses. After that, you can add it to your existing collection.
- Decide what percentage the creditor will likely accept: Most creditors receive 60–80% of the original amount. You might be able to get an even lower amount if you are dealing with a debt collection agency.
Send your first settlement offer after determining how much you can afford to pay and how much the creditor might accept. This will likely kick off the negotiation process. Before reaching an agreement, you should go through a few rounds of offers and counteroffers.
3. There should be a written settlement agreement
If a debt collector promises to keep their word, do not make the settlement payment without a written agreement. Consumers have been deceived and forced to pay up so the creditor can remove the case from the court or write the debt off as paid. Make sure the agreement you sign contains all the necessary information.
Kentucky debt settlement laws can protect you
As part of its efforts to protect citizens from bad business practices, Kentucky has enacted the Fair Debt Collection Practices Act and other Kentucky debt adjusting laws (KY Rev Stat § 380.100 (2022). According to these guidelines, debt settlement companies should:
- Provide full disclosure of the services and fees involved
- Make sure the agreement is in writing and contains all the vital information
- Fees should not be exorbitant, and fees should be disclosed
- Debtors should be allowed to cancel agreements if they have a good reason for doing so
Report debt settlement companies that violate these guidelines to the Kentucky attorney general. There is also a website where you can file a complaint with the Fair Trade Commission.
Further, the Federal Trade Commission recently amended the Telemarketing Sales Rule to extend debt settlement regulations to all debt relief organizations and companies. This Rule applies to debt settlement practices in all 50 states, including Kentucky.
As a result of the new Rule, any company providing debt relief services, including debt settlement companies, cannot:
- Fees should be charged upfront. Consumers cannot be charged any fees before the debt is successfully settled or resolved.
- A company needs to disclose certain information about its services to consumers before they enroll. There will be details about the cost of the service, how long it takes to see results, how much money must be saved before a settlement offer can be made, consequences if payments are not made on time, and the customer’s rights.
- Lie about their services. The services of a debt settlement company cannot be marketed in an unsubstantiated or false manner.
How do I choose the best debt settlement company?
It is important to note that not all debt settlement companies are legitimate. Some people take advantage of desperate consumers by making false promises or asking for money before reaching a settlement agreement. Read the reviews of debt settlement companies on various platforms before selecting one to work with. In addition, ensure that the company is not listed on the FTC’s list of companies that are banned. Consider the following debt settlement companies:
- United Settlement: This is a service provided by professionals that helps you determine if a settlement offer should be made before you contact the creditor.
- New Era Debt Solution: When you use this company, you are given a free debt analysis before you even begin the settlement process.
- Century: Century is similar to most debt settlement companies in that they take the burden of negotiating off your shoulders and come to you when they have found a good deal.
Contact the debt collector using the best method

Contacting a debt collector can be stressful if you cannot make payments. Once they realize that you wish to clear your debt, the conversation may go better than you anticipated. To discuss debt settlement with them, choose one of the following methods:
- Telephone: Debt collectors prefer this method of communication since there is no record of what has been said or promised. Kentucky is a one-party consent state, so you may legally record a conversation according to Kentucky Revised Statute §.010.
- By mail: Discussing a settlement deal by mail takes more time. Nevertheless, you have ample time to consider your response. Additionally, you have a written record of the settlement process. You should use certified mail if you prefer this method since it can be used to confirm receivership.
- Email: This method is instantaneous and simplifies settlement processes. With the correct email address, the negotiation process can be expedited. In addition, the entire negotiation is documented.
The lawsuit letter will contain the contact information for the creditor or the lawyer handling the case. If this is not the case, contact the company and ask for the person in charge of debt settlement requests. Debt settlement companies often know who to contact if they have previously worked with the creditor.
Kentucky debt relief
In addition to debt settlement, there are other ways to get out of debt. Among them are debt consolidation and bankruptcy. Generally, debt relief involves taking a loan with a lower interest rate to pay off several debts, leaving you with only one debt to repay.
For those whose liabilities exceed their assets and who have no other means of repaying their debts, bankruptcy is often the last resort.
Kentucky debt settlement FAQs

Are Kentucky debt settlement companies able to negotiate medical bills?
It is true that most debt settlement companies negotiate medical bills on your behalf and allow you to pay a reduced percentage of your original debt. Most creditors and debt collection agencies have a good relationship with legitimate settlement companies. You may have to pay 40-60% of the original amount if they can reach a reasonable settlement agreement.
Do debt settlement programs include private student loans?
Some debt settlement programs include private student loans, and you may be able to pay less than you owe. You must, however, demonstrate to the creditor or collection agency that you cannot make monthly payments for them to accept a settlement offer.
In Kentucky, how can I settle my credit card debt?
The first step is to determine if you can gather a lump sum to settle the debt. Your monthly income can be saved until you reach an amount your creditors will accept (60–80%). Your next step should be to send a Debt Settlement Letter to the creditor to begin the negotiation process. There is a possibility that they will be able to obtain a better deal than you.