Many unsuspecting debtors flock to debt settlement companies because they offer the lowest payment available for a debt relief program (excluding bankruptcy). However, a high number of debt settlement company clients find that the settlement company offers very little benefit at a very high cost. Worst yet, there are no protections from legal action.
Settling on a single debt will stop legal action on that one debt only. However, multiple debtors can pursue legal action, even if you have enrolled with a debt settlement company!
Judgments and Garnishments
Some creditors understand that a client with multiple debts in default will be unlikely to pay off their debt balance in the near future. They know that they are somewhere in line with the debtor’s other creditors waiting to be paid.
They know that nothing changes this when a client enters into agreement with a debt settlement company. In fact, they know that it could take longer to get paid because the debt settlement company is yet another creditor that is getting paid before any of the client’s existing creditors get paid. Debt settlement fees can total into the thousands of dollars.
The incentive for a creditor to pursue a judgment is that it immediately puts them in the front of the line. In fact, it even puts them ahead of the debt settlement company that is trying to collect its fees.
A judgment is a court order that requires repayment. It immediately trumps any other creditors’ claims to the debtor. It also requires repayment in full, not for a settled amount.
If the creditor believes that you can pay, then they have a real incentive to invest in legal action to increase the chance they will recoup the debt. It is in their best interests, especially for larger debt balances.
Some debt settlement companies try to claim that they have lawyers working for you. This provides a false sense of security that you will not have to worry about legal action on your debts.
The truth is, you will be on your own facing legal action if a creditor decides to pursue it. If you have multiple collection accounts with large balances, it is highly unlikely that you would be able to settle on them all prior to facing legal action by one or more of your creditors.
For a more thorough understanding, you may wish to review the pros and cons of debt settlement. There are many more potential problems that you could face than most debt settlement companies would like for you to know.
Tags: Debt Settlement, debt settlement company, garnishment, judgment, legal action