Facing financial struggles can make you feel alone and unsure of what to do next. You may feel like you're drowning and unable to escape a troubling situation that's only worsening. Fortunately, you have options. Debt settlement may be available for you. Settling a debt doesn't require an extensive amount of documentation. The most important part of your debt settlement will be your settlement agreement.
If you're interested in learning more about debt settlement and required documentation, continue reading. When you're ready to discuss the next steps. Fitzgerald & Campbell, APLC is ready to help you.
What Is Debt Settlement?
While you've likely heard of bankruptcy, there are other ways to try to straighten out your financial situation. Debt settlement is one of them.
Settling a debt involves paying off existing debt, usually for less than what you owe. Typically, the types of debts that are available for settlement are unsecured debts, including:
- Credit cards
- Store cards
- Personal loans
- Medical bills
Other types of debt, like federal student loans and mortgages, are not eligible for settlement (private student loans are eligible).
From a creditor standpoint, debt settlement can be better than bankruptcy. When you file for bankruptcy, there is a chance the creditor may not see any payment at all. When you settle a debt, they are at least receiving some of what you owe. Debt settlement usually requires negotiating with your creditors or getting assistance from a debt settlement company or a qualified attorney.
Creditors are not required to agree to a settlement. However, if you can successfully get a creditor to approve a settlement, you'll have to consider some important documents. Of these, the most important is your debt settlement agreement.
Understand The Terms Of Your Debt
First and foremost, it is helpful to understand the terms of your debt. You can usually get this information from letters and other documents your creditors mail to you. Your documents will detail the amount you owe. When settling a debt, you're often able to do so by only paying 40% to 50% of the total you owe. Documentation can help you understand your debt and better prepare to negotiate with your creditor.
A Debt Settlement Agreement
Once you've negotiated with your creditor, you'll need to create a debt settlement agreement. A debt settlement agreement is a contract between you and your creditor detailing the provisions of your agreement. It will include essential information, such as the payoff amount and how many payments you'll make before the debt is settled.
Important Provisions Your Debt Settlement Agreement Should Include
If your creditor agrees to a settlement, you'll want to ensure that you have a solid agreement covering all your bases. The most critical provisions to include in your debt settlement agreement are as follows.
Your agreement should include all the essential information, including:
- The creditor's name and information
- Your name and information
- The account number of the debt at issue
Basic information helps the agreement bind both parties.
The Settlement Amount
Your settlement agreement should clearly state the settlement amount. That way, there's no confusion, and the creditor cannot later come after you for more money.
Details Regarding Payments
The agreement will include details for future payments, including how many payments the debtor will make and the dates the creditor can expect to receive the payments.
The Creditor's Release
In this section, the creditor states that once this agreement is signed and you fulfill your promise to pay the settlement amount, they give up the right to go after you for the full debt or take any other action against you.
However, it is essential to note that the creditor is not giving up all their rights to take legal action should you not keep up your end of the bargain. For example, if you execute the debt settlement agreement and fail to pay the settlement amount in the allotted time, the creditor can take action against you.
The Debtor's Release
The debtor has its own release provision. Here, the debtor agrees that, after executing the agreement and fulfilling their duties under the contract, they promise not to take any actions against the creditor.
Like the creditor's release, the debtor is not giving up all their rights to take legal action against the creditor. If the creditor were to breach the contract in any way, the debtor is still entitled to take action against the creditor.
Provision Indicating Satisfaction Of The Agreement
The debt settlement agreement should include a provision stating the debt will be fully satisfied once the settlement amount is successfully paid.
Waiver And Amendment
The agreement should include a section explaining that neither party can disregard or dismiss any part of the agreement. Any changes to the agreement should be made in writing, requiring both parties' signatures.
When you sign an agreement with a voluntary execution provision, you indicate you've had sufficient time to review and understand the agreement. Additionally, you've been given enough time to seek legal counsel, if necessary and desired.
Any Additional Disclosures Or Representations
Your agreement will likely contain other relevant provisions, including:
- Governing law
The specific terms and provisions that your settlement agreement contains will depend on your situation and negotiations with your creditor.
A Debt Settlement Attorney Can Help You
When negotiating a settlement and creating an agreement, there is no better guidance than that of a debt attorney. A lawyer:
- Knows how to negotiate
- Understands the laws of your situation
- Can create a solid debt settlement agreement
While you may consider seeking assistance from a debt settlement company, they are not as knowledgeable as a lawyer and do not have the same resources available.
A debt attorney is your best ally for assistance with debt settlement negotiations and agreements.
Consult with a California Debt Attorney Today
Since 1992, Fitzgerald & Campbell, APLC has been helping clients get out of debt. We're proud to have saved clients hundreds of millions of dollars’ worth of debt to date. We understand that every client is unique and tailor our approach to every case.
Financial trouble can bring about turbulent times, causing mental, emotional, and physical stress. We have the knowledge and experience necessary to help get you the financial refresh you need. Count on us.
Our firm offers free consultations. Call us at (844) 431-3851 or contact us online.