DEBT SETTLEMENT

Debt Settlement

Sometimes settling a debt is a better option than fighting the lawsuit. Schafer Law Firm, P.C. has experience settling accounts with almost all creditors and debt buyers that file lawsuits in Texas. That experience allows us to inform you of what settlement options you are likely to have.


In many cases Schafer Law Firm, P.C. can negotiate for a one time lump sum payment or for payments spread out over several months to settle the debt. With the right approach many settlements can be reached without a judgment in the lawsuit.


If you’ve been sued for a debt and want to learn more about your settlement options call Schafer Law Firm, P.C. at 210-474-6950 for a free consultation.


Whether settling your own debt or enrolled in a debt settlement program, you need to be legally protected. Our legal plans start at $25 per month. Our legal services include:


  • Holding off or avoiding lawsuits
  • Avoiding bankruptcy
  • Stopping collection calls and letters
  • Representing you in court if a creditor sues you
  • Negotiating to settle lawsuits

Debt Settlement FAQ

  • What is debt settlement?

    Debt settlement is also known as debt management, debt negotiation, debt relief, debt resolution and debt compromise. Debt settlement involves negotiating with creditors to pay a smaller amount in exchange for satisfying your entire debt. You generally stop making your regular payments while saving up the settlement amount.


    Debt settlement can also involve negotiating to pay creditors on different terms easier for you like longer and lower monthly payments on the full or reduced balance.


    The goal is to resolve your debts, hopefully at a reduced amount, or at least on better terms so you can get out of debt without filing bankruptcy or dealing with lawsuits and judgments.

  • Who is debt settlement good for?

    It might be an option if you:


    • Have unsecured debt (for example credit cards, medical bills or a repossession deficiency balance)
    • Can't afford your minimum payments
    • Qualify for a debt settlement program or have the ability to do it yourself
  • What are the downsides of debt settlement?

    • Your debts may increase with fees and interest before the debt can be settled
    • Credit score damage: Stopping payments and settling significantly impacts your credit score for several years.
    • Fees and taxes: Debt settlement companies often charge fees, and settlements resulting in canceled debt may be considered taxable income.
    • Some debt settlement companies violate the law by taking more fees and settling little or no debt. The Consumer Financial Protection Bureau has information on many of these companies and individuals.
    • Lawsuits: Creditors can sue you if you stop payments before reaching a settlement. See our answers to more detailed questions in our next section where we cover more of the debt settlement issues in depth.
  • Can I do debt settlement myself?

    Yes, but it can be challenging. Consulting a lawyer or reputable debt settlement company can be helpful. There are some untrustworthy debt settlement companies, even if they work with an attorney, so it is important to check out ownership, complaints and even the state bar for discipline history if an attorney is involved.

  • What are the alternatives to debt settlement?

    Consider:


    • Debt consolidation: Combines your debts into one loan with a lower interest rate.
    • Debt management plan: Reduces your monthly payments through a credit counseling agency.
    • Bankruptcy: Should be a last resort with severe financial hardship. Be careful if considering this option. In our experience, some bankruptcy attorneys want to sell you a bankruptcy even if it isn’t what’s best for you.
  • Where can I learn more about responsible debt management?


    Remember: Before embarking on any debt relief strategy, research thoroughly and seek professional advice if needed. Choosing the right path can help you escape the debt trap and achieve financial wellness.

  • Will a creditor file a lawsuit against me if I hire a debt settlement company to handle my debt with them?

    It's unlikely that simply hiring a debt settlement company will cause a creditor to sue you. But how the debt settlement company proceeds can cause a creditor to sue you. Typically the more time that passes from your last payment, the more likely you are to be sued. That’s why some debt settlement companies set you up to fail if they take a lot of money up front for fees or legal plans before they use your money to settle your accounts. 


    Here's some of the reasons a creditor may file a lawsuit if you hire a debt settlement company:


    • Debt settlement companies advise you to stop paying your debts after you sign up for their services. If you have not yet defaulted on a debt, then this can put you on a fast track for a lawsuit. Some creditors will not work with settlement companies and they don’t like it when a settlement company tells you to stop paying them. Creditors know if they sue you quickly, then you are likely to drop the settlement company and work directly with the creditor.
    • Debt settlement companies advise you to not talk with your creditors or debt collectors. Creditors don’t like this because phone calls are the least expensive method of collecting a debt. If they can’t talk with you, it can speed up the process of sending your account to a collection attorney.
    • Many debt settlement companies don’t contact a creditor until they think they have enough funds to settle. If you aren’t communicating with your creditors and the settlement company isn’t either, then a lawsuit usually comes fast.
    • Cost-effective for creditors: Lawsuits are low cost in Texas. Most collection lawsuits can be filed and served on you for less than $100.
    • Creditors don’t want people to think they can get a discount on their debt if they stop paying. Often they would rather file a lawsuit or sell your debt to a debt buyer instead of sending the message that you can save money if you stop paying them.
    • Many creditors don’t care about their relationship with you. You are an account number with a $ dollar amount next to it. Their short-term profit is more important to them than you are. We saw during the Covid-19 pandemic that some banks filed lawsuits faster than we had seen in the previous 18 years. Specifically Discover Bank and American Express were quick to file lawsuits against their customers who had faithfully paid them for more than 20 years.
    • Creditors can legally check your credit report and asset report. They know if you are paying other debts and not them. They also know if you own assets like an expensive house or have large house and car payments. That information can cause them to file a lawsuit faster.
  • What can I do so creditors don’t sue me?

    You can contact your creditors and pay the full balance or arrange a settlement as fast as possible to avoid lawsuits. If you are not able to do that, Schafer Law Firm has experience helping thousands of Texas defend debt lawsuits and settle debts not yet in lawsuits. That experience gives us insight into how to avoid debt lawsuits when you want to settle your debts.  Some creditors will not work with a debt settlement company, but are required to work with a lawyer. Here are some of the ways we can help you and avoid creditor lawsuits.


    • If you can settle your debts quickly, your creditors are less likely to sue you or sell your account to a debt buyer who will sue you.
    • Creditors don’t want to hear your reasons for not paying, but they listen to us. You have to talk to customer service often in a different country. Schafer Law Firm communicates directly with their legal department. We often represent people enrolled in debt settlement programs and inform your creditors that we represent you and tell them about your hardship circumstances.
    • Through our many years of helping Texans with debt lawsuits, the debt collection law firms know that we represent people truly in financial difficulty and our clients are not people who just choose to not pay their bills. If a debt collection law firm knows Schafer Law Firm represents you, they will contact us before they file a lawsuit against you.
    • Creditors don’t want to quickly sue our clients because lawsuits will be expensive and time consuming for them. Working with us to resolve the debt is a faster and less expensive option for them.
    • Creditors know that if they sue you, Schafer Law Firm will still be there to represent you, unlike a settlement company. The creditor doesn’t gain any advantage by suing you when you already have us retained to deal with the debt and lawsuit.
    • Negotiating a settlement with Schafer Law Firm allows creditors to recover at least a portion of the debt, which is often better than getting nothing through a lawsuit when we defend it.

    Here are some tips to minimize the risk of being sued after attempting to settle your debts:


    • Be realistic about your financial situation. Don't agree to a settlement you can't afford to meet.
    • Get everything in writing: Once you reach an agreement, ensure you have a written document outlining the terms of the settlement. This will help to ensure that both parties are on the same page.
    • Stick to the terms of your settlement agreement. Make your payments on time and in full.
    • Keep records of all communication and payments with your creditors. This will help protect you if there are any disputes later.

    However, there are some situations where a lawsuit might still be possible even after attempting a settlement:


    • Violation of the settlement agreement: If you miss payments or fail to adhere to the terms of the settlement agreement, the creditor may choose to pursue legal action.
    • If the debt is large or complex: For larger debts or those with complex legal issues, creditors might be more likely to pursue a lawsuit to recoup their losses.
    • Misrepresentation or fraud: If you misrepresent your financial situation or engage in fraudulent activities during the settlement process, the creditor may sue you.
    • If you breach any terms of the settlement agreement, the creditor may sue you.
  • How can a law firm help me when it comes to debt settlement?

    When Schafer Law Firm represents you, your creditors are required to deal directly with us and cannot legally contact you. We encourage your creditor to take a pause to review your situation and legal representation along with options to work with your willingness to resolve the account before they file a lawsuit.


    • If you get Schafer Law Firm to help you with your debts, we contact your creditors and express your willingness to settle and stress your strong position of being represented by a law firm experienced in defending debt lawsuits.
    • We remind your creditor to consider your financial situation and how much you can afford to pay.
    • We inform your creditors that you are prepared to make a reasonable offer and compromise to take care of your debt.
    • Schafer Law Firm ensures any settlement agreement is documented and legally enforceable. If you complete your part of the settlement, we can use the law to make sure the creditor marks the debt as settled. If they don’t, then you can sue them to enforce the settlement agreement, and the court can order them to pay you.
    • We don’t start with a fight (even though some nasty debt collectors need to get put in their place). We start by communicating an initiative and good faith desire to negotiate for a fair and reasonable resolution to debts that often include excessive late fees and high interest.
    • Creditors are often more open to negotiating with debtors who demonstrate a willingness to resolve their debts. Attempting to settle shows that you're taking responsibility and actively seeking a solution.
    • Schafer Law Firm negotiates for a settlement to lower the amount you owe or lower payment terms, making it easier for you to resolve the debt.
    • Schafer Law Firm knows which creditors are likely to sue you first, so we know which accounts to prioritize.

    If you're concerned about the possibility of being sued, remember it's always a good idea to consult with a qualified attorney with experience with debt lawsuits. They can review your situation, negotiate a fair settlement, and ensure you're protected throughout the process.

  • Can debt settlement save me money?

    It can save you money, but as with most things, the answer is complicated and depends on how you calculate savings. It depends on several factors, including the amount of your debt, your individual circumstances, and the specific terms of any settlement you reach. Additionally, the costs and benefits of debt settlement include more than the debt and payoff amount.


    Things to consider with debt settlement:


    • Reduced debt: The goal is settling your debts for less than you owe or to get repayment terms that work for you.
    • Your financial situation: If you have a steady income and are confident you can make the monthly payments to the debt settlement company, it may be a viable option. However, if your finances are unstable, it could lead to further financial hardship.
    • Lower monthly payments: In some settlements you can make payments towards a settlement. If Schafer Law Firm arranges the settlement, your lower payments will count towards getting rid of your debt. If you are paying into an account managed by a debt settlement company, it may be used for fees or any debt, but nothing specific to settle a debt with one of your creditors.
    • Stop accruing interest: Once you enter a debt settlement program, you usually stop making payments to your original creditors, which can halt the accumulation of interest and late fees when a creditor charges off the account after about six months.
    • Harm your credit score: Debt settlement can significantly damage your credit score for several years, making it difficult to obtain loans, credit cards, and other financial products. A lower credit score means you pay more for credit.
    • Uncertain outcome: There's no guarantee that your creditors will accept your settlement offer, and the negotiation process can be lengthy and unpredictable.
    • Costly fees: Debt settlement companies typically charge fees, often as a percentage of the settled amount, which can add up and eat into your savings.
    • Risk of legal action: If you stop making payments to your original creditors, they may take legal action against you, such as filing a lawsuit or garnishing your bank account.

    Here are some things to consider before deciding on debt settlement:


    • The amount of your debt: Larger debts might benefit more from the potential savings of settlement, but weigh the impact on your credit score.
    • Your financial situation: Do you have enough income to make the regular payments needed for settlement?
    • Your credit score: How important is maintaining good credit for you?
    • Alternatives to debt settlement: Explore other options like credit counseling, debt consolidation loans, or repayment plans offered by your creditors.

    Schafer Law Firm can help you understand your options and determine if debt settlement is the right choice for your specific situation. If so, we can advise you on the best way to settle debt effectively and improve your financial health.


    Ultimately, the decision of whether or not debt settlement can save you money depends on your individual circumstances and priorities. Weigh the potential benefits and drawbacks carefully, explore all alternatives, and seek professional advice before making a decision.


  • What is the best way to settle a debt?

    There's no single "best" way to settle a debt, as the optimal approach depends heavily on your unique circumstances and the details of your debt. Here are some effective strategies and factors to consider when determining the best way to settle your debt:


    Before attempting settlement:


    • Assess your financial situation: Analyze your income, expenses, and savings to determine how much you can realistically afford to put towards a settlement.
    • Gather information about your debt: Collect details like the total amount owed, interest rates, and names of creditors.
    • Explore alternative options: Consider debt consolidation loans, credit counseling, or budgeting strategies before committing to settlement.
    • Assess the amount and type of debt: Unsecured debts like credit cards are typically easier to settle than secured debts like mortgages or car loans.
    • Analyze your financial resources: Consider your current income, savings, and essential expenses to determine what you can realistically afford to offer in a settlement.

    Negotiating the settlement:


    • Contact your creditors directly: This allows you to avoid fees charged by debt settlement companies and potentially secure better terms. However, if you don't have the time or the ability to negotiate, outside help can be beneficial.
    • Be polite and professional: Maintain a positive and collaborative approach during negotiations.
    • Explain your financial hardship: Provide a transparent explanation of your situation and why you cannot afford the full amount.
    • Offer a realistic lump sum payment: Base your offer on what you can realistically afford to pay, not just on a significant reduction in the original debt.
    • Get everything in writing: Ensure any agreed-upon terms are documented in a signed agreement.
    • Consider debt settlement companies: These companies can negotiate on your behalf, but they typically charge fees that can eat into your savings. Be cautious of aggressive or misleading practices by some companies.
    • Lump sum payment: This can be attractive to creditors as it guarantees immediate recovery, potentially leading to a significant discount. However, it requires upfront financial resources.
    • Payment plan: Negotiate a structured repayment plan with reduced monthly payments over a longer period. This can be easier on your budget but may result in less overall savings.
    • Debt consolidation loan: Consider consolidating multiple debts into a single loan with a lower interest rate. This can simplify your payments but may not reduce the total amount owed.

    Evaluating potential debt settlement companies:


    • Research their reputation: Look for companies with good reviews and a history of success.
    • Beware of scams: Avoid companies promising unrealistic results or charging exorbitant fees or upfront costs. Research their reputation before engaging their services.
    • Understand the impact on your credit: Debt settlement will likely hurt your credit score, so consider the long-term consequences.
    • Settlement amount vs. original debt: How much can you potentially save by settling?
    • Fees associated with debt settlement companies: Compare fees to potential savings.

    Additional tips:


    • Prioritize communication: Stay in touch with your creditors and keep them informed of your progress.
    • Avoid missing payments: Stick to the agreed-upon terms to avoid jeopardizing the settlement and potentially facing legal action.
    • Seek professional advice: Consult a debt attorney for personalized guidance and support.

    Seek professional help if needed:


    • If your situation is complex or you're unsure about the best course of action, consider consulting a debt attorney for personalized guidance. Schafer Law Firm can evaluate your circumstances and offer help to avoid debt lawsuits while you settle your debts.

    Remember, debt settlement is a serious decision with potential consequences. Weighing the pros and cons carefully, researching your options, and protecting yourself throughout the process are crucial to achieving a successful outcome.

  • What is a good settlement for a debt?

    Determining a "good" settlement for your debt depends entirely on your specific situation and risk tolerance. Ultimately, a good settlement is subjective but must be something you can pay.


    There's no one-size-fits-all answer, but here are some observations Schafer Law Firm has made while helping thousands of clients with unsecured debt issues:


    • A good settlement is one you can pay because the terms fit within your budget.
    • Lump sum settlements typically save you more than settlements on payments.
    • You save more money if you can settle a debt before it goes to a debt collection law firm.
    • Most of the time, after a lawsuit is filed, the settlement amount is higher.
    • Sometimes creditors sell accounts to debt buyers. Schafer Law Firm gets involved in debt lawsuits every day. Depending on the debt buyer and which law firm they use to file the debt lawsuit, the settlements can range from 20% up to 80% of the charge off balance.
    • Your creditors can review your credit report so they know what bills you pay. They know if you have an expensive house or drive an expensive car. They can check your assets for non-exempt real estate. They use all this information to negotiate. The better your financial position, the more money they want.
    • Schafer Law Firm can sometimes get original creditors and debt buyers to drop a lawsuit without getting any money because we communicate our client’s circumstances and hardship information.
    • If using a debt settlement company or a law firm, factor in their fees and ensure they don't outweigh potential savings.

    Ultimately, the best settlement for your debt is the one that balances the potential financial savings with the risks and drawbacks. It's crucial to do your research, compare options, and seek professional help if needed before making any decisions.


    Here are some resources that may be helpful:


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