4 Things to Know Before Signing a Florida Debt Settlement Agreement
Most creditors and third-party debt collectors are willing to settle a debt for less than what is owed on a debtor’s account. This is not an act of benevolence or altruism. Debt collectors understand that going through the courts to obtain a judgment and enforce a debt is a costly and time-consuming process that is often fruitless, especially when the debtor genuinely lacks the resources to pay. So it is often in a creditor’s own interest to offer a settlement that guarantees them some payment now.
If a creditor offers you a debt settlement agreement, however, you also need to act in your own interests. This means working with an experienced Orlando debt settlement and relief attorney to assist you in reviewing and negotiating any potential agreement. You should NEVER accept a creditor or debt collector’s proposed settlement agreement at face value. Here are four reasons why:
- The Terms Will Favor the Creditor
When a creditor–or usually, their own attorney–drafts an agreement, you can be sure any terms are favorable to their interests. Indeed, the creditor is hoping you will sign their proposed debt settlement agreement without consulting your own attorney who can explain to you just how unfavorable the deal is for you.
- You May Be Waiving Valuable Legal Rights
Creditor-drafted debt settlement agreements frequently contain provisions waiving many of the legal rights intended to protect Florida debtors. For example, there may be language waiving a debtor’s “head of household” exemption under Florida law, which protects a debtor’s wages and earnings from creditor claims. Waiving this exemption makes it much easier for a creditor to garnish a debtor’s paycheck.
- You Are Admitting the Debt Is Valid
Signing a debt settlement agreement means you acknowledge the underlying debt is valid. This may sound like common sense. But having this admission in writing does a couple of things. First, it can “reset” the clock on the statute of limitations applicable to the enforcement of the debt. Second, it potentially waives any claims you might have against the creditor or third-party debt collector for illegal collection practices. Finally, it can prevent you from later contesting the amount of the debt in court, even if you had valid grounds to do so.
- There Are Federal Tax Implications
You may not realize this, but most debts settled for less than the full amount owed are considered taxable income by the IRS. A creditor or debt collector probably will not inform you of these consequences when you sign a debt settlement agreement. If you have your own attorney, however, they will explain this to you before you sign on the dotted line.
Contact an Orlando Debt Settlement Attorney Today
While it may be tempting to quickly sign a debt settlement agreement offered by a creditor, in the long run you will be much better off taking your time to speak with a qualified Orlando debt settlement and relief attorney who can properly advise you of the risks and benefits. Contact Florida Law Advisers, P.A., today to schedule a free consultation.