Sued While on a Debt Relief Program
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Many consumers are sued for debt while they have a debt relief company hired. This is why you should hire a lawfirm who includes lawsuit defense into their debt settlement agreement.
How Do You Prevent a Lawsuit While on a Debt Relief Program?
It’s important to realize, before agreeing to a payment plan and paying anything on a debt, that most debt relief companies offer no protection from legal action. Creditors and collection agencies know how the system work and unfortunately, some try to take advantage of desperate consumers.
If you have any doubt your agreement won’t be honored by the creditor or you suspect you won’t be able to stick to the payment plan, you are better off not working with a debt settlement company unless they are a law firm.
Debt Relief Programs and Debt Settlement Programs
Though there are creditors that work with you and follow through on their end of the agreement not to sue you as long as you make your payments, some are not as trustworthy. There are debt relief companies that will encourage you to participate in a payment plan and even if you adhere to it, will file a lawsuit against you anyway
Making matters even more complicated, some debt relief programs are just bill collectors that falsely present their services in a consumer-friendly way. They create an arrangement with a consumer to pay a lump sum every month and advise them to stop other credit card payments, even if they have not yet fallen behind. Unfortunately, by stopping your payments, you increase the odds your credit card company will sue you. You think you’re taking care of your debt by paying the debt settlement agency, but you’re actually getting yourself in a deeper hole and putting yourself at greater risk for a lawsuit.
Taking Action
If you are at risk for drastic action related to a debt, you will receive warning. If a bank or other creditor or debt collector is suing you, considering foreclosure or repossession, or attempting wage garnishment, you will be notified. This means you’ll have time to respond to the lawsuit or take other action to prevent a worst case scenario.
The most important thing to realize when it comes to dealing with past due debts is that the sooner you act the better.
By taking action earlier instead of ignoring notices and pretending everything is fine, you give yourself as many options as possible. As time passes, the creditors gain more control and you lose the ability to manage your debt situation.
Debt Relief Programs vs. Bankruptcy
Though participating in a debt relief program might seem like a better option than filing for bankruptcy, this is often not the case. There are a few reasons for this.
First, filing for bankruptcy creates something called an automatic stay. An automatic stay not only protects you from legal action, it stops all collection efforts. The only way a creditor can continue to take action is if they file for a motion for relief from the stay, which needs to be approved by the court. In addition to lawsuits, automatic stays stop foreclosure proceedings, wage garnishments, repossessions and even the daily phone calls you’re likely receiving from creditors.
Choosing bankruptcy over a debt relief program also gives you more options. There are no guarantees when you embark on a debt relief program. Even if the debt relief agency is on the up-and-up, if your personal financial situation changes, it can upset the plans for relief. Once you’ve entered into bankruptcy, you are guaranteed the financial relief that it provides.
In chapter 7 bankruptcy, many – if not all – of your debts will be discharged. This means you’ll no longer be legally obligated to pay those debts. Creditors lose their power to take any action against you, ever, when a debt is discharged in Chapter 7 bankruptcy.
Chapter 13 bankruptcy filers are obligated to participate in a repayment plan that typically lasts three to five years. They are responsible for paying a portion of their debts, but they cannot be sued while in the midst of their bankruptcy repayment.
Is a Debt Relief Program Right for Me?
If you do not qualify for Chapter 7 Bankruptcy then a debt settlement plan is usually the best option provided that the company you hire also agrees to defend all lawsuits. At Weston Legal we do just that, if you are sued for a debt within the debt settlement plan we will defend it at no charge. We can also discuss potential bankruptcy options with you.
If you’d like to know more about debt relief programs or you have questions about bankruptcy, we can help. Contact us at 1.800.220.4318 to schedule a consultation.