Most clients come to us for help with handling credit card debt (or other consumer debt) upon being sued by a creditor or collection company, or when looking to get a mortgage loan and needing to clean up their credit reports. This blog post covers options that are an alternative to bankruptcy.
The steps to handle the debt is similar for both groups of clients, except that with the first group of clients, the case is in already in court, and with the second group, the case is limited to their credit reports. If a lawsuit is involved, make sure to file a proper Answer within the require time frame so that the creditor is unable to get a judgment by default.
STEPS TO TAKE TO HANDLE CONSUMER DEBTS
- FIRST, SEEK TO DISMISS THE CASE/ DEBT.
- NEXT, SEEK TO VALIDATE IF UNABLE TO DISMISS.
- LASTLY, SEEK TO SETTLE FOLLOWING PROPER VALIDATION.
Try to get the matter dismissed by challenging the lawsuit or the reported debt. Here are some things that could lead to a dismissal: The time period to sue has expired; The debt was already paid off or settled; The creditor/ collector sued the wrong person; The case is brought in the wrong court; The case is brought by the wrong party. There are other things that could lead to dismissal. Whenever in doubt, consult a debt defense attorney for help.
Send a written debt validation request to the creditor. A debt validation request is a request that the debtor makes for the creditor/ collector to prove up its right to collect the debt, as well as prove up the debt amount. Validation may fail due to lack of proper documentation to prove the charges, lack of proper documentation to prove assignment of the debt; or lack of a response to the validation request. If validation fails, you should seek a dismissal of the court case (if in court), and removal of item from credit reports.
If unable to get the matter dismissed, and the debt has been validated by the creditor, make an offer of settlement. The goal should be to settle for the terms most convenient and most favorable to you. It is important to know that the following components are possible and should be part of your offer:
- Request a steep discount (start with 75% discount)
- Request waiver of attorney fees and court costs
- Request a delayed payment date
- Request a payment (can be up to 36 months)
- Request a Paid in Full/ Settled in Full letter (upon final payment)
- Request suspension of filing of a Judgment
- Request Release of Judgment (if a judgment was agreed to)
- Request credit report update (upon final payment)
If you need legal guidance on any of the steps above, contact our office or seek other legal help. Make sure all offers and acceptance are in writing and that all the terms agreed to are covered inside a Settlement Agreement document signed by both sides. If not in writing, it will be difficult to prove or enforce the agreement in the future.