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Debt Settlement Agreements – Be Careful What You Sign!

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Many debt collectors will offer a settlement agreement or stipulation to a consumer after a lawsuit is filed.  Usually, that agreement specifies that the consumer is to make certain payments every month for a set time period.  Often, the agreement promises that the debt collector will not seek or enforce a judgment, or will simply claim that the consumer can avoid “going to court”, if they only sign the agreement.  Then, when the consumer misses a payment or is short on a payment, significant problems can arise: their bank accounts are emptied, their car is seized, or their wages are garnished.  It is heartbreaking receiving a call from a consumer at this stage, as many of their rights have already been lost.

Countless times, after reviewing the lawsuit documentation, we are able to identify valid affirmative defenses that the consumer could have asserted to prevent the entry of a judgment.  However, most settlement agreements require that you give up your rights to defend the lawsuit.  Sometimes, they require you to agree in writing that you owe the debt – even if this isn’t true!  We have even seen settlement agreements / stipulations that give up your legal right to shield some of your money from judgment creditors.

Before you agree to sign such a settlement agreement, we would be pleased to review it and advise you of your rights and obligations.  For example, perhaps your income and assets are exempt from seizure if the debt collector obtains a judgment against you.  This may include your social security, disability, worker’s compensation, unemployment, wages/salary of the head of household, and other income or assets.  Why would you voluntarily want to give your money to a debt collector if they have no legal right to take it?

Unfortunately, if you aren’t aware of your rights, you may lose a significant portion of your funds that you could otherwise spend on essentials.  Don’t lose those rights – contact us today for a free consultation.