How to Settle Debt for Pennies on the Dollar
You can settle debts for far less than you owe by responding to lawsuits within 14 to 30 days. Filing an Answer prevents automatic default judgments and gives you negotiating power. Many collectors accept 25 to 50 percent settlements because proving old debts is difficult.
Answer Your LawsuitYou can settle old debts for far less than you owe. Debt collectors often accept partial payments because something is better than nothing.
The key is acting fast when you receive a lawsuit. You typically have only 14 to 30 days to respond.
Stop Wage Garnishment Before It Starts
You have only 14-30 days to respond to your debt lawsuit. File your Answer now to avoid default judgment and negotiate a settlement for pennies on the dollar.
Respond to LawsuitFailing to respond means automatic loss. Nearly 90 percent of debtors end up with default judgments against them.
Why Debt Collectors Sue You
Debt collectors file lawsuits hoping you won’t respond. When you ignore the complaint, they win by default.
They can then garnish your wages or place liens on your property. You lose all negotiating power.
But responding changes everything. You gain time to build your defense and power to negotiate.
Many collection agencies lack proper documentation to prove you owe the debt. They need to find records when you fight back.
How to Respond to a Debt Lawsuit
You must file an Answer document with the court. Our partner Solo helps you create this document quickly.
Your Answer should include affirmative defenses. These are legal arguments for why you don’t owe the debt.
Common defenses include:
- The debt is past the statute of limitations
- You already paid the debt
- The collector sued the wrong person
- The amount claimed is incorrect
- The collector lacks proper documentation
Filing your Answer stops the default judgment. You force the collector to prove their case in court.
Settling Debt for Less Than You Owe
Once you file your Answer, you can negotiate. Collectors know getting partial payment beats getting nothing.
Many will settle for 25 to 50 percent of the balance. Some accept even less.
You have leverage because they must now prove their case. They may lack the original contract or account statements.
Start by offering 30 percent of the debt. You can negotiate up from there.
Get any settlement agreement in writing before paying. The document should state the payment satisfies the entire debt.
Keep in mind that settled debts may impact your credit score. But a settlement is still better than a judgment.
What Happens After You File
Filing an Answer doesn’t automatically end your case. About half of people who respond get their cases dismissed.
The rest may need to attend court hearings. You’ll have time to gather evidence and prepare your defense.
Collectors must prove three things:
- You owe the debt
- They have the right to collect it
- The amount claimed is accurate
Many collection agencies can’t meet this burden. They bought your debt for pennies and lack original documentation.
You can request proof through discovery. Ask for the original credit agreement and complete payment history.
Missing documentation often leads to case dismissal. Our partner Solo can help you navigate this process.
Common Mistakes to Avoid
Never ignore a debt lawsuit. Hoping it goes away guarantees you lose.
Don’t miss filing deadlines. Courts strictly enforce these time limits.
Avoid admitting you owe the debt without verification. Make collectors prove their case first.
Don’t agree to payment plans you can’t afford. Broken agreements strengthen the collector’s case.
Never communicate without keeping records. Document every phone call, letter, and email.
Your Rights Under Debt Collection Laws
The Fair Debt Collection Practices Act protects you. Collectors cannot harass, threaten, or deceive you.
They must verify debts when you request it. You have 30 days after first contact to demand verification.
Collectors can’t call before 8 AM or after 9 PM. They can’t contact you at work if prohibited.
You can stop collection calls by sending a cease communication letter. They must then contact you only through legal proceedings.
Document any violations. These can become defenses in your lawsuit or separate claims for damages.
Why Acting Fast Matters
Time is your most valuable resource in debt lawsuits. You typically have 14 to 30 days to respond.
Missing this deadline results in automatic judgment. The collector wins without proving anything.
They can then take 25 percent of your wages. Bank accounts and tax refunds become vulnerable too.
Judgments remain on credit reports for seven years. They devastate your credit score and future borrowing ability.
Responding quickly protects your assets and gives you negotiating power. You can often settle for far less than claimed.