Although hundreds of thousands of people resolve their debt through debt settlement every year, there are still many questions and misconceptions about its risks. One outcome that people fear during debt settlement is creditors who take legal action. If you are in a debt settlement program or are considering one, this post is a great resource to help you understand that risk, how low it is, and what you can do if you are one of the few people who face legal action.
- Legal Action During Debt Settlement Is Uncommon
- Understanding Why Creditors Take Legal Action
- What To Do if You Receive a Summons During Debt Settlement
- What To Do If You Go To Court During Debt Settlement
Legal Action During Debt Settlement Is Very Uncommon
Historically with Beyond Finance clients, only 1-2% of enrolled accounts see any sort of legal action. In these circumstances, the account is usually resolved without going to court but with fewer savings than the majority of accounts not affected by legal action.
We will always be transparent about what our clients can expect from the program and highlight universal aspects of the client experience. Fortunately, the number of clients who face the threat of legal action does not reflect the program as experienced by the majority of our clients.
Understanding Why Creditors Take Legal Action
You may be wondering why a creditor would take legal action and ask, “wouldn’t a creditor prefer to stay out of court?”
The answer is yes. It is always better for both the creditor and our clients when things stay out of court. But creditors will still use legal action as a way to intimidate the borrower and expedite their payment.
Legal Action is a Strategy Creditors and Debt Collectors Use to Get Paid Faster
Sometimes, the original lender no longer owns the debts our clients have enrolled. After a period of delayed payment during debt settlement, creditors may sell the accounts to collection agencies that can be more aggressive in their collection efforts.
Collection agencies may take legal action if a debt is delinquent for a set number of days, but they believe the borrower can pay.
The threat of legal action is an intimidation strategy that some creditors and many debt collection agencies use to get a response from borrowers. If they initiate a lawsuit against you, they assume you will respond and try to pay them before paying another creditor. Lawsuits force Beyond Finance to bump that creditor to the top of the list — and creditors and collections agencies know that.
If a debt collector starts a legal process when you are in debt settlement, more often than not, it will never go to court. After our negotiations team works with the creditor or collection agency to reach a settlement on a client’s behalf, it generally neutralizes the threat of legal action.
What To Do if You Receive a Summons During Debt Settlement
If a client receives a legal summons from a creditor (from a process server or through certified mail), we instruct them to contact our Client Success Team as soon as they can by phone, email, SMS text message, or web chat. We also ask them to send us any documents they have received regarding the legal action.
Our team will review the client’s program, identify all documents, and point the client toward helpful legal resources. From there, we will do everything we can to help resolve the debt before the scheduled court date.
What To Do if You Go To Court During Debt Settlement
On the low chance that your debt makes it to court, the Better Life Plans service can help.
As a Beyond Finance client, you have the opportunity to enroll in Better Life Plans, which will provide “Pro Se Answer” documents to file with the court. This will take the guesswork and anxiety out of securing legal counsel elsewhere and managing legal proceedings by yourself.
In the unlikely event that you do end up in court as a result of one of your enrolled debts, please keep these things in mind:
- There is no criminal liability for these cases. Also, your creditor has no claim to your property, such as your home or car.
- Ultimately, you may be required to pay the debt in full or via a payment plan, but you can continue to resolve your other enrolled debts through your Beyond Finance program.
Have Other Concerns?
If you have other questions or concerns about your program, reach out to our Client Success Team at (800) 282-7186 or check out the blogs below to learn more.