Your Rights Before and After Debt Settlement (Part II)

The rights and protections you enjoy as a debtor in the United States do not go away once you have applied for or been accepted into a debt settlement program and had your settlement plan approved by the creditor. In fact, your rights under the Fair Debt Collection Practices Act continue in force and effect so long as a debt collector is attempting to collect a debt you owe (which may continue while you are working your debt settlement program).

There are additional rights and protections that you enjoy once you have proposed a debt settlement plan and had that plan accepted. Knowing these rights will help you be an informed and confident debtor and protect you from abusive or dishonest tactics some creditors may try to engage in. Specifically, your rights after you have had a debt settlement plan include:

The right to work the debt settlement program: Most debt settlement agreements contain a provision stating that when the debt settlement plan is approved by all parties that the credit will not take any further collection action unless and until the debtor fails to complete the plan. In other words, the creditor must give the debtor an opportunity to work the plan to which the creditor and debtor agreed. Implicit in these agreements is an understanding that the creditor will not take any action that might undermine or interfere with the debtor’s ability to work the debt settlement program. For example, a creditor is usually not permitted to refuse to accept payments under the program or fail to post payments in a reasonable time simply so it can claim that the debtor did not make timely payments.

The right to have the debt that was settled properly reported to the credit bureaus: Other posts have discussed how you may be able to negotiate for a term in your debt settlement agreement that requires the creditor to remove certain negative information from your credit report. However, even if such terms do not make it into your final debt settlement agreement, your creditor must report your debt accurately to the credit bureau. That is, the creditor must (at a bare minimum) report that the debt has been settled and must report that you paid the debt settlement as agreed (once you have done so).  See more here.

The right to be free from further collection efforts: Once your debt has been settled per the terms of your agreement, you are relieved from any further legal liability to pay the amount of the debt that was written off as part of your agreement. A creditor is not permitted to agree to a debt settlement plan, accept your payments under the terms of the settlement agreement, and then thereafter pursue you for the remainder of the debt originally owed. If a creditor were to do this – or if a debt collector were to attempt to do this – you would be entitled to produce a copy of the debt settlement agreement along with records showing that you paid the agreed-upon amount in accordance with the debt settlement agreement and have a court find that you cannot be pursued for the remainder of the debt.

Hiring a debt settlement lawyer or a consumer law attorney to help you when you are attempting to sort out your debts and affairs is a great way to help ensure that your legal rights are protected throughout the debt settlement process. Your attorney will also know what actions can and need to be taken if a creditor or debt collector violates these rights.  Contact an attorney at Ariano & Reppucci, PLLC for additional information.

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