by the Debt Attorneys at Ariano & Associates, PLLC

rights in debt settlement explained by the debt attorneys at ariano & associatesAs many Americans continue to try and recover from the effects of the Great Recession nearly eight years ago, debt relief companies have taken to the airwaves in increasing numbers to encourage cash-strapped debtors to use their services. One such company has taken to the radio airwaves and employs a commercial suggesting that debtors have the “right” to settle their debts with their creditors. “It sounds almost too good to be true,” a debtor might think. The prospect of not just proposing a debt settlement plan but requiring a creditor to accept a lump-sum payment instead of the entire debt may be too enticing to pass up.

However, what rights do debtors have when it comes to debt settlement plans? The answer is, “Not as many as you might think.”

The Rights You Don’t Have

Debtors proposing a debt settlement plan have far fewer rights than they might imagine. In many cases, a creditor’s decision to accept a debt settlement plan is not due to the debtor or any right he or she may have. Instead, creditors enter into these agreements after carefully considering the benefits and drawbacks and determining that the agreement is in their financial best interest. Here are the “rights” that debtors may believe they have when negotiating a debt settlement plan:

  • You don’t have the right to a debt settlement plan. As mentioned above, creditors are not obligated to accept a debt settlement plan or offer such a plan to debtors in distress. While a debtor may propose a debt settlement agreement at any time, the creditor does not have to agree to the terms proposed by the debtor – or agree to any plan at all.
  • You don’t have the right to the same plan as your friend or family member. Debtors may be inclined to offer a debt settlement plan to their creditor after hearing about a friend or family member who proposed a debt settlement plan and had that plan accepted. Even where the financial situations of the debtor and the friend or family member are the same, however, a creditor is not obligated to extend the same debt settlement plan to the debtor as it did to the friend or family member. There are many factors that go into a creditor’s decision to agree to a debt settlement plan, and the debtor’s financial situation is just one of those factors. There may be many other reasons why a creditor would choose to decline to enter into the same debt settlement plan as it did for another customer. Debtors whose identical debt settlement plan proposals are denied usually have no recourse but to attempt to negotiate a different agreement.
  • You don’t have the right to stall other collection activities. Just because you propose a plan does not mean the creditor must stop all collection activities. Creditors can – and often do – continue their attempts to collect the debt up until the time the agreed-upon lump sum payment is received. Debtors who are concerned about continuing collection efforts should negotiate an agreement with the creditor whereby the creditor does agree to postpone other collection efforts pending the consummation of the settlement agreement.

This is not to say that debtors are at a completely disadvantaged position when negotiating a debt settlement agreement. However, debtors should not approach the process believing that the creditor “owes” the debtor anything or that the debtor has certain rights that must be respected. Instead, debtors should be prepared to show the creditor how the proposed plan benefits the creditor to have the greatest chance of having their plans approved.  Contact an experienced attorney at Ariano & Associates for more information about your rights in debt settlement.