How do I settle a collection lawsuit without hiring a lawyer?
“How do I settle a collection lawsuit without hiring a lawyer?”
Remember you have 5 options when sued by a debt collector (debt buyer) such as LVNV, Midland, Portfolio, etc.
- File bankruptcy
- Fight the case on your own
- Settle the case on your own
- Hire a lawyer to fight the case
- Hire a lawyer to settle the case
So let’s talk about option three — settling the case on your own. (I’m assuming you know to file your answer to the lawsuit — otherwise you may get a default judgment against you even as you are talking to the collection lawyer.)
First, talk to the collection lawyer
Call the collection lawyer if you are handling this on your own and work out a lump sum or a monthly type payment arrangement. Ask what your options are and then pick the one that is best for you.
Second, get the settlement terms in writing
Get the settlement terms or agreement in writing so there are no nasty surprises by the collector.
Let’s say you are sued for $5,000 and the settlement you work out is for $3,000.
OK, get that in writing that when you pay the $3,000, the case is over. Dismissed with prejudice.
Here’s why — we’ve had lots of cases where people pay the $3,000, but the debt collector still comes after them for the “remaining” $2,000, but there is no $2,000 owed. See, you owed five, you paid three so now you owe nothing.
But if you don’t get it in writing, they will go, “I’m sorry you misunderstood, you simply made a partial payment and you still owe $2,000”
No, let’s make it very clear, in writing. $3,000 and we’re done with this lawsuit.
Third, make sure the case gets dismissed with prejudice
Many people stop with the call or maybe they even get the agreement in writing and then they stop.
This is a mistake.
You want to make sure that the collection lawyer dismisses with prejudice. With prejudice means they cannot sue you again. It’s over. It’s done.
Finally, what about your credit reporting?
Well, is that the end of it? No, because you want to look at your credit report because Capital One or Midland or LVNV, they are saying on your credit report you owe $5,000. If you settle with them for $3,000, and it’s done, then the case is over.
The case is dismissed with prejudice.
Now make sure your credit report says you owe zero dollars. Now, it can say that at one time you owed $5,000. That’s fine, but now you owe zero.
Usually what we do is send a letter to the credit bureaus, and say, “Look, you are reporting inaccurate information.”
Here’s the reason why.
Capital One, Midland, whoever it is, they often won’t update the credit bureau, Equifax, Experian, TransUnion. They won’t tell them that you owe zero now. A lot of times in their mind, you still owe them $2,000, and they may say, “Oh, you know what, we could sell this debt to somebody else.”
You want to catch this very quickly, so you write the letter and you say, “My Midland account” … or Capital One or whoever it is … you say “I owe $5,000. I owe zero. If you have any doubt, check with Midland or Capital One [or whoever sued you].”
Sometimes you include a copy of the order dismissing the lawsuit with prejudice.
If it gets fixed, great.
If it doesn’t get fixed, you sit down with a lawyer. We’d be happy to help you if you live in Alabama. We do this all the time. We file suit in federal court against the credit bureaus, and the furnishers. The furnisher is the Capital One, the Midland, whoever it may be who’s doing that false credit reporting.
Now, we’ll say this. If it’s a debt collector, sometimes you don’t have to do that dispute. There are some different laws. I don’t want to get bogged down in this area in this post. However, the point is, you were sued for five grand. Now that’s over. You want your credit report to reflect that, not to show that you still owe $5,000 or maybe you owe $2,000 because they just took five minus three, and they go, “Oh, you owe us $2,000.” “No, I don’t owe you anything. Zero. Nothing.” Make sure your credit report shows this accurately.
If you have questions about a settlement you have made or you are thinking about making, and you live in Alabama, give us a call at 205-879-2447 or contact us through our website and we’ll get right back with you.
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