- Reduce debt by up to 40%
- Be debt free in as little as 12-30 months
- Lower your monthly payment
- Make one simple monthly payment
- Don’t risk your home or other personal property if
you miss a payment
- Don’t pay service fees unless our program saves you money
- Reduce your stress and get a “New Deal”
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Disadvantages of Debt Settlement - Possibility of Legal Action
(The following is for education purposes only and not legal advice. To learn more about the legal ramifications of debt settlement, please talk to an attorney licensed in your state).
Another common objection to debt settlement is the possibility that you can be sued by your creditors. Since during the course of a debt settlement program a consumer’s payment are past due, creditors are reserved the right to pursue legal action on a defaulted contract. Although the possibility of legal action exists, in many cases it does not make financial sense for the creditor to do so. Oftentimes creditors use threats of legal action to give the creditor account a higher pay-off priority. There are three main reasons why this is true:
1. The costs associated with filing a lawsuit against debtors can be costly and time-consuming. For this reason legal action is typically a last resort for creditors when they have exhausted all other collection options. When a settlement offer is on the table whereby the creditor can collect between 25 and 60 percent of the balance in a lump sum, the costs and risks of filing a lawsuit instead typically does not make financial sense, particularly in light of the following point:
2. The debtor can still file bankruptcy. When legal action is imminent many consumers opt to file bankruptcy rather than deal with wage garnishment or a lien on their home. In many cases bankruptcy leaves the creditor with nothing, and they still are liable for the court costs and the law firm’s legal fees.
3. A payment plan can still be reached. Since the costs associated with filing suit, locating a debtor’s assets, and executing a judgment can be quite high, creditors typically prefer working out a payment plan even after a lawsuit has been filed. Although this is not ideal and it can still be costly for the consumer, a payment plan may be a better option for the debtor than bankruptcy or wage garnishment.
Follow this link to discover some other potential disadvantages of debt settlement.
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