There are options available to help you rebuild your credit and move forward if you owe a debt you cannot repay.
Millions of Americans are burdened by credit card debt, car loans, mortgages, and medical bills they cannot pay. While everybody is trying to keep up with their financial obligations, sometimes things get out of hand – and it becomes impossible to stay on top of them.
As soon as you cease making regular payments, your creditors will increase collection activities against you or sell your debt to a debt collector. They may even attempt to sue you if necessary.
In Wisconsin, facing a debt lawsuit can be stressful. If you fail to take action, your creditor may be able to garnish your wages and freeze your bank account.
The good news is that you can settle the debt before your court date and avoid a judgment. Here is how.
To settle a Wisconsin debt, follow these three steps
You should follow three steps to settle your debt before your court date if you are facing a debt lawsuit:
- You are required to respond to the debt lawsuit with an Answer.
- Begin the process of negotiating a debt settlement.
- Make sure that the settlement agreement is in writing.
Each of these steps will be explained below.
1. You must respond to the debt lawsuit with an answer
If a creditor or debt collector initiates a lawsuit against you, it is typically accompanied by a Complaint. It will explain why they are suing you, probably due to default on some obligation, usually a loan, credit card, or medical debt. Your principal balance and any interest and fees will be listed.
Although you intend to settle your debt well before your court date, you must still file an Answer to the Complaint to protect yourself from a default judgment.
You have 20 days to respond to a debt lawsuit in Wisconsin before automatically losing the case.
It is possible to use multiple defenses to defend yourself in an Answer. Among the most common reasons is improper validation of the debt or the expiration of the statute of limitations. However, there may be others that are pertinent to your particular case.
2. Negotiate debt settlements
You should then determine how much you can afford to pay in settlement. Determine how much money you have in savings and how much cash you will be able to raise in the next few weeks. If you do not have much extra money, consider selling a few things you do not need or asking family and friends for assistance.
The best chance of success for consumers is to pay around 60% of the total value of their debt. For example, if you owe $3,000, you will offer $1,800 in a settlement.
It is common to go through several rounds of negotiation before reaching an agreement with your debt collector when you begin negotiating for a settlement with them.
Don’t sign any settlement that you cannot afford. If you have extenuating circumstances that prevent you from paying 60% of your debt or more, explain them to the creditor or debt collector. You may be offered another arrangement or more time to pay the settlement.
3. Make sure the settlement agreement is in writing
You must obtain a written settlement agreement before sending money to your creditor. Your contract should spell out every aspect of your deal, including how much you will pay, when it will be due, and where it will be sent.
It would help if you also stipulated in the settlement agreement that your creditor will not be able to pursue you for the remaining debt balance once you have paid the settled amount.
You can draft your agreement and fill in all the relevant information regarding your debt.
Your creditor should notarize the agreement, and your signature should also be notarized. In this way, there will be witnesses to the contract, giving greater legitimacy if the debt collector violates the agreement.
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Here is an example of how a Wisconsin debt can be settled.
The following example illustrates what Tammy is going through when Capital Management Services is suing her for credit card debt. She answers the lawsuit before the deadline of 20 days, which gives her time to work out a debt settlement. Tammy decides that she can afford to settle the debt at 70% of its original amount after researching the debt, analyzing her finances, and researching previous debt settlements involving Capital Management. Capital Management Services receives and sends settlement offers to her. The initial offer Tammy made stated she could pay off 40% of the debt. This gave her some room for negotiation, and after a few rounds of counteroffers, Capital Management accepted Tammy’s offer of 65% of the debt.
Wisconsin’s debt collection and debt settlement laws can protect you
As with most other states, Wisconsin is bound by the Fair Debt Collection Practices Act (FDCPA), which limits the actions that debt collectors and creditors can take when collecting a debt. Among other things, debt collectors are not permitted to:
- Contact a consumer regarding a debt before 8 a.m. or after 9 p.m.
- Call a consumer repeatedly about an obligation to harass them.
- Make contact with a debtor more than seven times in the course of seven days.
- Contact them at work even if the debtor asks not to be contacted.
- Make other people aware that the individual owes money.
- Threaten to harm someone’s reputation for failing to pay a debt.
According to Wisconsin Statute 427, debt collectors are prohibited from taking specific actions, such as:
- Communication with an individual’s employer regarding their debt.
- Assuming they have a right to bring an activity they do not possess.
- Threatening the individual with criminal prosecution.
- Communicating with the individual in a harassing or offensive manner.
There are penalties for debt collectors and creditors who violate the statute, including fines for emotional distress and up to $1,000 per violation.
It is also necessary for debt collectors and creditors to adhere to the Wisconsin statute of limitations when attempting to collect a debt. The statute of limitations for most consumer debts, including credit cards, personal loans, and medical debt, is six years under Wisconsin Statute 893.43.
The Federal Trade Commission recently amended its Telemarketing Sales Rule to include all debt relief organizations and companies. This Rule applies to all 50 states, including Louisiana, relating to debt settlements.
Companies that provide debt relief services, such as debt settlement companies, are prohibited from:
- Companies that settle debts cannot charge consumers upfront fees before the debt has been effectively settled or otherwise resolved.
- More information should be provided about the program’s services before consumers enroll. This includes the cost of the service, how long it takes to see results, how much money needs to be saved before a settlement offer is made, the consequences that the consumer may incur if they fail to pay on time, the customer’s rights, and other essential terms.
- It is not permissible for a debt settlement company to make false or unsubstantiated claims about its services.
How do I choose the best debt settlement company?
Several options are available to you if you are ready to take control of your debt and begin the settlement process with the assistance of a debt settlement company or agency.
National Debt Relief
National Debt Relief is a respected debt settlement company that negotiates settlements for individuals overwhelmed by debt. National Debt Relief charges between 15% and 25% for its services. When you enroll in one of its programs, you will make monthly payments that the company will save towards settling your obligations.
Freedom Debt Relief
One of the largest debt settlement companies in the nation is Freedom Debt Relief. It has helped over 650,000 individuals settle their debts since 2002. You must make monthly payments towards your debt settlement when you enroll in one of its programs. As with National Debt Relief, it charges between 15% and 25% of your debt.
What is the best way to contact my creditor to begin debt settlement?
It is possible to begin the debt settlement process by contacting your creditor or debt collector via telephone, email, or letter.
In most cases, you can negotiate a settlement within a day or two of starting an email communication with your creditor. Email communication is recommended because it is quick and will provide you with a record of your negotiations with the debt collector.
You can, however, conduct your negotiations over the telephone if you have little time. It is important to record your conversation to have a record in case the creditor reneges on your deal later on. By Wisconsin Statute 968.31, only one party must consent to a recording of the call. That individual will be you.
Wisconsin debt settlement FAQs
You may have many questions if you have never settled a debt in Wisconsin. Here are a few of the most common questions you may have.
How much debt should you offer to settle?
You are more likely to be able to negotiate a settlement with your creditor if you offer 60% of your total debt. However, if you cannot afford that amount, contribute whatever you can. Your creditor will consider your offer and find a solution that is mutually beneficial to you and your creditor.
Is there a way for me to get out of debt in Wisconsin?
If you follow the program and make regular payments, you will be debt-free within four years. Debt settlement programs can help you eliminate debts you cannot pay in full.
Should a debt be settled or paid off?
The most advantageous option is to pay off your debt entirely rather than settle it even if you miss payments or pay late; paying your debt ultimately looks better to future creditors than fixing it.
If you are struggling financially, debt settlement can help
While going through the debt settlement process can be nerve-racking, it can alleviate severe financial issues. Taking some time to rebuild your credit score may take effort, but you will be able to reclaim your financial health with some effort. You will no longer have to worry about debt collectors or creditors calling you.