Getting the terms on paper before paying
A debt settlement agreement should identify the account, the creditor that owns it, the amount to be paid, and the schedule. It should say plainly that payment resolves the debt in full rather than just a portion of it, and that the creditor will not sell the remaining balance to someone else. If a lawsuit is pending or a judgment has been entered, the agreement should say what happens to the case: a dismissal, a stipulation, or a satisfaction of judgment filed with the court. It is also worth addressing how the account will be reported to the credit bureaus. A promise that is not in writing is hard to rely on later.
Keeping the trail
Keep the signed agreement, the proof of every payment, and the name of the person you dealt with. Pay in a way that leaves a record, and be cautious about giving open access to your bank account. If the debt was sold more than once, confirm that the company you are settling with actually owns it or has authority to act for the owner. After the final payment, ask for a letter confirming that the account is resolved and, where a case was filed, for proof of the court filing. A forgiven balance may be treated as taxable income in some situations, so a tax professional should look at any cancellation form you receive.
Where we usually help
We review a proposed agreement before you sign it, and we draft one when the creditor's version leaves things out. If you are being sued, we look at whether there are defenses, such as timeliness or proof of ownership, that change the bargaining position before you agree to anything. We also check whether a judgment already exists, because settling a judgment and settling an unpaid account are handled differently. If several debts are involved, we talk about whether piecemeal settlements make sense or whether a broader approach fits your situation better.
