You may have received a settlement offer from a creditor or debt collection agency. If so, you have a choice to make. You may either accept the offer, counter with an offer of your own, or simply disregard it.
The majority of debt collectors and creditors will make an offer when someone does not seem to be able to pay back their debt for some reason. Then it comes down to the debtor’s decision whether to accept or reject a settlement offer.
Taking an example, if you suddenly stop paying on a loan, the creditor may think that you’ve lost your job or you’ve run into financial difficulties.
In the event that your creditor attempts to rehabilitate your finances by offering you a new payment arrangement or a settlement, then it is your responsibility to decide what to do with the offer. When you receive the offer, the ball is in your court, and you must decide what to do next.
Reject A Settlement Offer If You Can’t Afford It
There are times when you may need to reject the settlement your creditor offers you if you can’t afford to pay them, just as you wouldn’t buy a house that is outside the parameters of your mortgage, you shouldn’t accept a settlement that you know you can’t afford.
Nevertheless, you can come up with a counteroffer instead of rejecting the settlement outright. For example, suppose your creditor offers you a settlement for 75% of the value of your debt in a lump sum payment. Alternatively, you could counter with an offer that you can afford, such as 45% of your debt. Your creditor will then decide whether or not to accept your offer or counter with another offer.
Let’s take a look at an example of how this might work.
It is a fact that Jason, for example, is being sued by a debt collector over a $4,000 debt. At the moment, Jason is able to afford to settle the debt for $3,500 in a lump-sum amount. In an effort to save money and avoid a judgment against him in court, he sends a settlement offer, asking the debt collector to settle for $2,000. The collector sends a counteroffer, and the two parties negotiate until they reach a settlement of $3,200. In this case, Jason saves money and avoids having to pay a judgment on him.
Can I Expect My Creditor To Stop Trying To Negotiate A Settlement With Me?
A creditor may stop the negotiation process if you are not able to reach a settlement agreement with them. Instead, they may offer you a monthly payment arrangement that does not require you to pay as much upfront. There may be minimal monthly payments until your debt has been paid off.
A payment arrangement is the best option for consumers who cannot afford to settle their debts with their creditors. By accepting the payment arrangement, you will be protected from a lawsuit, but you will also be giving yourself more time to save money toward a settlement.
The best way to eliminate your debt more quickly is to pay double, if not triple, the amount of your minimum payment if you can afford it. Take on a short-term, part-time job or start a side hustle to bring in some extra income to help you repay your debt faster. Put as much money toward debt payment as you can.
Is There A Penalty For Not Following My Payment Agreement?
In the unlikely event that you do not adhere to your payment plan, your creditor may tire of trying to work with you. They may decide to pursue the debt by filing a lawsuit. Once you start a lawsuit, you will have to pay back the debt or settle with them to avoid a judgment.
In a judgment, your creditor will be able to take specific actions against you, including garnishing your wages, freezing your bank account, and seizing certain assets of your property. If you have an open judgment, it will be difficult for you to obtain new credit or find a new job. Whenever possible, it is best to avoid judgment.
Appeal A Court Judgment
It is true that you can defend yourself from a judgment in court on the grounds that you do not owe the debt or that the claim does not apply to you. However, to prove this, you will need to show the judge why you are not liable.
Your first step in fighting your creditor’s complaint is to respond with an answer to the complaint filed by your creditor.
Generally, an Answer is a letter that refutes the claims made against you. You may argue that the debt has gone past your state’s statute of limitations on debts or that you were an authorized user of the credit card.
Often, people are not aware of debt until they receive notice of a lawsuit. If this happens to them, they may be victims of identity theft. People who are victims of identity theft should file complaints with the Federal Trade Commission as well as their local police station.
Your answer should be filed in accordance with the rules of the courts in your local area. You should also send a copy of the answer to the creditor.
You will need to appear in court on the date set by your lender to answer questions and make your case. The judge will then decide whether a judgment is appropriate or not. In case you win the case, your lender will not be able to file any further legal claims against you.
In The Event That My Creditor Wins, What Will Happen?
It is common for a creditor to garnish a portion of your wages or freeze your bank account during a time of judgment against you. This will reduce your income until you have fully repaid the loan. If the creditor garnishes your wages, you will lose a portion of your income.
The creditor will be able to seize any assets used as collateral if the consumer receives a judgment for a loan with collateral, like a car.
If you can avoid judgments involving loans and creditors, you’ll eliminate future financial headaches and legal problems.
Considering rejecting a settlement offer? You may want to consider making a counteroffer. If you refuse to accept a settlement offer or fail to comply with a payment arrangement, your creditor may decide to take you to court.