How To Avoid Settlement Tricks Used By Credit Lawyers
Have you ever been named in a civil suit by a credit card company? It’s not pleasant and what can happen next is even less enjoyable.
Here a typical sequence of events.
Section one: You overuse a credit card; you miss some payments; you are charged $39 per month for late payment, $39 per month for over limit; your interest rate skyrockets from 6% to 29.9%; your original debt of $10000 is growing rapidly.
Section two: You miss 6 consecutive payments during which time you are harassed by phone and mail; the credit card company offers you a discounted settlement which might be the original total but more likely is greater than the original $10000 even with the discount; you cannot pay and ignore the offer or decline; the credit card company assigns or sells your account to a credit collection legal firm, a ‘credit lawyer’.
Section three: You are harassed by phone for several more months; you are offered a settlement which usually is just about the original loan amount, in this example $10,000; you cannot pay so you decline or ignore.
Section four: The credit lawyer files a civil action for the full amount now perhaps $15000; you receive notice of the civil action and have 30 days to respond or face a summary judgment in favor of the plaintiff. You panic and call Aunt Mabel and borrow $7500. You contact the credit lawyer and beg for a settlement. They agree and prepare the legal paperwork. You visit their office to give them the certified check and get the release.
Section five: You trade the $7500 for a receipt and a copy of a ‘Dismissal Without Prejudice’ which the credit lawyer promises to file with the County Clerk.
You breathe a sigh of relief, that is over. Somehow you will repay your Aunt Mabel.
It is not over.
Section six: 5 years later you are selling your house. At closing, you receive your settlement check. It is $7500 less than you expected. You ask why. Those funds were used to settle the $7500 lien on your property from 5 years ago. You are upset. What are they talking about, you settled that debt.
I am not a lawyer, but I have great legal advice for anyone trying to settle a debt - always require a statement which dismisses all claims of the debt holder. If a civil action has been filed, then require a ‘Dismissal With Prejudice’.
Dismissal without prejudice is a legal action by a plaintiff to dismiss a case without giving up the right to refile the case at a later date. In other words, I want a ‘do over’ please. In the example of a negotiated credit card debt settlement, it leaves the defendant - you - open to a civil action on the remaining balance at the whim of whomever owns the residual debt. That residual debt could be sold to anyone.
Be careful out there.
Credit repair and debt relief are challenging subjects.
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Add comment March 11th, 2008
