Do Debt Settlement Laws Vary By State?

Each state has different debt settlement laws. Debt settlement is negotiating with your creditors to reduce your debt. Your debt can be reduced anywhere from 20% to 80% depending on your financial situation and what your creditors are willing to accept. Laws constantly change as legislatures enact new ones to protect consumers from dishonest companies that take advantage of consumers and unfair debt practices by collection companies and creditors. Every state must follow the federal laws that prevent a collections agency from harassment and telephone calls to consumers who send a Cease and Desist letter and/or a Power of Attorney notifying the collection agency that a third party is handling their negotiations with the creditor. Some states provide further protection that prevents the creditor from committing the same practices.

Requirements

The following are requirements that debt service companies may need to follow:

Provide consumers with a description of their services to be performed and amount of their fees
Some states require debt settlement companies to be licensed and to provide a surety bond.
Laws may also prohibit settlement companies from advising consumers to stop payments to creditors
Provide clients with a debt settlement agreement letter for each creditor
Provide that consumers can cancel their contracts

You should check your state laws to determine your legal rights. An attorney can explain the laws to you.

Kinds of Debt Settlement Companies

Most consumers do not understand the debt settlement laws, and do not have the expertise to negotiate a debt settlement; they usually use a debt settlement company who is experienced in convincing credit card companies and other creditors to reduce your debt. There are two kinds of debt settlement companies- non-attorney and attorney firms. Non-attorney companies cannot give you legal advice. An attorney is knowledgeable about the laws and is the only person that can give you legal advice. Both negotiate debt reduction with your creditors. It’s a personal preference as to which type of company you choose. Just make sure they are reputable. Check references, and look them up on the Better Business Bureau website. Find out exactly what services they are going to perform, their fees for the services and if there are any guarantees if they are unsuccessful.

Work with an Attorney

A debt settlement attorney is an expert at negotiating debt settlement with creditors. The attorney understands and follows the laws exactly. An attorney can represent you in court if there is a lawsuit between you and your creditor.

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