It may be necessary to agree to a debt settlement stipulation with your lender. A debt settlement is an arrangement made between debtor and creditor. The creditor agrees to accept a payment that is less than what the debtor owes as payment in full.
What Is a Debt Settlement Stipulation
In situations where an individual is behind in their debt, the lender may send a letter of stipulation. If you have received this type of letter, read it thoroughly. It may even be advisable to consult with your attorney prior to signing the agreement. However, it is not always a bad thing to agree to a debt settlement. Agreeing to the settlement means that by signing the stipulation you will make a onetime lump sum payment to the creditor to pay off the debt, usually for less than the amount owed. Before signing a letter of stipulation or any debt settlement offer you have received from a lender, ask a few questions.
- Who is the creditor and what debt are they collecting? It is imperative to know this especially if the original lender sold the debt to a collection agency. Check your records to locate the debt and to make note of any differences in the balance.
- What is the specific offer? Most debt settlement offers are set up so that you pay a onetime payment to the creditor. Some will allow you to pay more than one payment, but the payment is likely to be more than your monthly minimum payment. The offer should state how many payments are necessary. It should also specifically state that the payment will pay off the debt in full.
- Are there any stipulations included? In some situations, debt settlement stipulations may be included. One example of this is when the lender places a specific date by which the borrower must make the final payment. If you fail to make that payment, the debt settlement offer may go away.
- Are there any other court proceedings? With the letter of stipulation, it should state that in exchange for the payment, the creditor and all they work on behalf of will no longer pursue any type of legal proceeding so long as the payment occurs.
- Are there signatures and dates included? The debt settlement offer must include the signatures and dates of those who are able to make such decisions. If you are leery about who signed the document, contact the company directly and request information.
- Is there any other wording that is troubling? Within the debt settlement stipulation letter, there may be other wording that may concern you. If any wording seems contrary to what you may have discussed with the creditor, or with other information in the offer, do not sign the letter. Contact your attorney first.
Should You Settle Your Debt
A debt settlement may be a positive thing for many people. It can help to close out debts that you are unable to pay otherwise. However, debt settlement stipulation agreements can be tricky. Before you sign them, be sure you know what is included.
- Does the settlement close out the debt for you and your spouse, or anyone else listed on the account?
- Will the creditor continue to report the debt on your credit report?
- Has the original creditor sold the account and has agreed to no longer collect on it?
- Will paying the settlement help improve your financial standing?
- Are you able to make the lump sum payment that the lender is requesting or will the lender accept several payments? If so, do get this outlined in the settlement documentation.
Debt settlement can be a positive option for those who need a fast way to pay off their debt and who have the funds to do so. If you do have these funds, but have not yet received a debt settlement offer from your lender, contact them and request a settlement. They may consider it if you are several months behind on your debt payments.