A person who is the target of a creditor may try a number of different ways of getting out of debt. These can include restructuring payments to creditors, as well as cutting back on expenses. However, sometimes a person may attempt to settle for less money with his creditors. This can be done by the debtor on his own or with the help of a debt settlement company. Enlisting the aid of such a company does not protect a person against creditor lawsuits.
Debt Settlement
When a person approaches a debt settlement company, she is seeking professional assistance in settling the debt that she currently has with one or more creditors. The debt settlement company will help the person negotiate with her creditors and identify financially viable ways to reduce her debt. The debt settlement company will usually be working toward a profit, but the advice it can provide may be financially beneficial to the debtor.
Debt Lawsuits
Enrolling in a debt settlement company, although potentially financially advantageous, does not offer a person any special protection against creditor lawsuits. A creditor can still sue a person for owing him money. Usually, this lawsuit will take the form of a breach of contract suit, as the debtor has breached the debt contract he held with the creditor. While debt settlement firms may be able to give advice about how to respond to this suit, they cannot prevent it.
Other Suits
While a person can be sued by a creditor for owing money, she cannot be sued simply for enrolling in a debt settlement company. There is nothing illegal about enrolling in a debt settlement company, nor does enlisting the aid of settlement professionals open the debtor up to any kind of legal action. The basis of a creditor lawsuit would have to be the debt, not the debt settlement company.
Bankruptcy
While a person can still be sued after enrolling in a debt settlement company, he cannot be sued after filing for bankruptcy. As soon as a person files for bankruptcy, he can notify his creditors of his filing, and his creditors can no longer file suits against him. However, if the bankruptcy is dismissed, then the creditors can once again file suit against the debtor over the debt.
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