Most likely, you are responsible for a few debts, such as credit card debt or medical expenses. Your creditor will likely increase collection efforts if you fail to make your payments on time. A creditor or a debt collector working on their behalf may contact you frequently by phone, email, or letter.
Your creditor will likely charge off your account if you do not return to making your monthly payments. They may sell it to a collection agency or take legal action against you.
Debt collectors and creditors may seek a judgment that freezes your bank account or garnishes your paycheck when you’re sued for a debt. When a judge orders a default judgment against you, they hope you will respond later and lose the case automatically.
Before your court date, you would like to avoid a judgment and resolve the matter with your creditor. This can be accomplished through the debt settlement process.
Here are three steps for settling your Texas debt
The debt settlement process consists of three steps.
- Defend your debt by responding to the lawsuit.
- Start the negotiation process by sending a settlement offer.
- Make sure the settlement agreement is in writing.
1. Reply To The Case And Defend Your Debt
Your creditor will initiate legal action against you by filing a Petition with your local Texas court. The Petition outlines the reasons for your lawsuit, such as nonpayment of a debt. Additionally, it will indicate the amount of money you owe, including interest and penalties.
If the debt lawsuit is filed against you, you will need to respond with an answer. Defending your case is the purpose of an Answer. If you file an Answer, your creditor cannot seek a default judgment against you. As a result, the judge must examine your defense and any additional evidence you provide. Additionally, you will be able to present your case in court.
Although you intend to avoid court and settle your debt with your creditor, you should still file an Answer. Alternatively, if settlement efforts fail, you can defend yourself against a judgment in another way.
In Texas, you have 14-20 days to respond to a debt lawsuit.
2. Send a settlement offer to begin negotiations
In the second step, you will need to determine how much you can offer in a debt settlement. Take a look at your savings and any expected income. Consider selling items you no longer need or taking on some contract work if you have little cash. Additionally, you may be able to obtain a loan from family or friends.
When settling your debt, it is best to offer at least 60% of the total amount. Your creditors will be able to see that you are serious about settling your debts with them. They will consider your offer to assess whether accepting a single lump-sum payment is more cost-effective than pursuing a judgment.
It’s important to remember that creditors aren’t trying to make your life miserable; they’re only trying to recoup a debt they owe you. If they understand your financial situation, they might accept a lesser amount instead of an entire collection.
You may have to go through several rounds of negotiation with your creditor before you reach an agreement. Keep your word and do not accept an offer that you know you will not be able to fulfill. If you fail to make the required payment, your creditor will initiate a lawsuit against you.
3. Write down the settlement agreement
After you have reached an agreement with your creditor, you should have the agreement in writing. You can refer to the contract if questions arise in the future.
Your agreement must state how much money you will pay your creditor and when it is due. In addition, you should indicate how you will send your payment.
You should be released from the remaining debt balance under the agreement. Creditors will drop lawsuits against you and report the settled account to credit bureaus.
Most of the time, the creditor or debt collector will draft the settlement agreement and file it with the court. Before signing any document, make sure to read it carefully. Furthermore, consider notarizing the signature to make it even more official, preventing the opposing party from backing out.
The three steps of debt settlement have been discussed. Here is a hypothetical example to illustrate them.
Sarah lives in Texas and has not paid her monthly credit card bill to Complete Financial for six months. One month, she had an unexpected car repair expense and gave up on getting back on track. Complete Financial takes legal action against Sarah in a lawsuit filed in Justice Court. According to the court complaint, Sarah hasn’t paid her debt and owes $2,000.
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Complete Financial receives Sarah’s answer before the Texas Justice Court deadline of 14 days. In her response to the lawsuit, she provides insufficient validation of the debt. A settlement is arranged between Sarah and Complete Financial. To settle her obligation, she offers $1,200 to the company. Complete Financial accepts the settlement offer. Sarah transfers her money after signing the contract. Complete Financial has settled Sarah’s account, and the lawsuit against her has been dropped.
Debt collection laws and debt settlement laws in Texas
The State of Texas abides by the Fair Debt Collection Practices Act (FDCPA), which imposes certain restrictions on collecting debts. Creditors and debt collection agents cannot take the following actions against consumers:
- Make contact with a consumer at odd hours, such as before 8 a.m. and after 9 p.m.
- You can threaten a debtor with prison if they do not pay.
- Social media can be used to publicize the consumer’s debt.
- Contact the consumer pretending to be someone else.
- Inform a debtor’s friends or family that they owe money.
- When an individual fails to repay an obligation, they threaten to ruin their reputation.
The Texas Finance Code FIN 394.208 requires debt settlement companies that enroll clients in their programs to comply with specific requirements. Companies that settle debts must, in particular:
- Payments toward the program should be made regularly by the consumer.
- Before enrolling the consumer in a debt settlement program, could you provide them with debt counseling?
- Provide individualized advice concerning the debtor’s debts, including specific recommendations.
Under Texas Finance Code FIN 394.212, additional rules protect consumers from debt service management companies. Collectors cannot take the following actions:
- You can reward consumers for signing up for a debt management contract by offering them a bonus or reward.
- Obtain a contract with a consumer by immoral means.
- Consumers should not be subjected to unfair or deceptive practices.
In Texas, the statute of limitations caps the time a creditor has to sue a debtor. Lawsuits for written and oral contracts and debts on account are limited to four years under TX Civil Practice & Remedies Code 16.004 (2019). Upon passing the four-year limitation, the debt becomes time-barred.
Can you recommend a few debt settlement companies?
Several debt settlement companies can assist with the debt settlement process. You may end up in an even worse situation if you fall victim to these scams.
Consider the following debt settlement companies.
Accredited Debt Relief
To help individuals with unsecured debts such as credit cards and medical bills, Accredited Debt Relief offers debt settlement services. To qualify for the company’s programs, you must have at least $10,000 in debt and agree to make monthly payments. Your debts are negotiated one by one by Accredited Debt Relief, and programs last up to four years.
National Debt Relief
The company has helped thousands of people settle debts with their creditors. Thousands of people have been helped by the company since 2009. The company charges clients 15% to 25% of the value of their debt for its services.
Freedom Debt Relief
Freedom Debt Relief is another company that provides debt settlement services. Since 2002, the company has assisted over 650,000 clients in resolving their debts. Program participants can expect it to last between two and four years. The fees charged by Freedom Debt Relief are similar to those charged by National Debt Relief.
Century Support Services
Debt relief companies such as Century Support Services are also popular with customers. During the past five years, the organization has assisted customers in resolving over $1.7 billion in debt. According to the amount of debt clients wish to settle, Century Support Services charges 18% to 25% of their debt.
How can I get in touch with my creditor?
Whether by email, telephone, or letter, you can settle your debts with your creditor.
Getting started with debt negotiations is as simple as sending an email. The process is quick, and you will have time to consider the creditor’s message before responding. Additionally, email provides a written record of the conversation between you and your creditor, which can be helpful in the future if you need to refer back to it.
Some individuals prefer to speak directly with their creditors. Record your conversation with your creditor if you decide to call them. If your creditor accepts your deal, you’ll have it as proof.
According to Texas. According to Penal Code 16.02, only one party must consent to record a phone conversation. It will be you who grants their consent.
Texas debt settlement FAQs
You may have other questions regarding debt settlement in Texas. The following are some of the most common questions we receive.
When it comes to settling a debt, what is a reasonable offer?
It is usually reasonable to settle a debt for 50% to 60% of its value. Your creditor will typically consider your offer seriously if you meet these requirements. If you can’t afford that much, offer what you can and explain your financial circumstances.
After being served in Texas, can I settle my debt?
In Texas, you may settle your debt after receiving notice of a lawsuit against you. Start negotiating with your creditor once you have determined what you can afford in a settlement. Before transferring money, be sure to get your agreement in writing.
Should A Debt Be Settled Or Paid Off?
Debt should be repaid in full as soon as possible. You can maintain your credit score and relationships with creditors by paying your debts on time. However, settling the debt may avoid a judgment in the case of debt lawsuits or great financial difficulties.