Debt Settlement Law In Simple Words

The law is never simple. In fact, lawyers can often disagree about the meaning of legal concepts. Ask any lawyer a question about a factual scenario and you will almost never get a simple yes or no answer. Contrary to popular belief, attorneys do not just enjoy being obtuse; the truth is, the law was designed to be malleable and even the slightest shift in facts will change the legal analysis. Fortunately, however, even the law has some universal truths and that information can help you in negotiating your debt settlement.

In order to understand the principles behind the law, we must explore some basic concepts. Roughly, about ninety percent of debt is the result of some type of contract. For example, you sign an agreement with a credit card company whereby they agree to advance you five hundred dollars. In return for this advance of money, you agree to pay back any charges you make on the advance plus interest on the money you charge. Therefore, when you and the credit card company disagree about the amount of money, you owe or even about specific charges made, contract law governs the dispute.

There is good news and bad news about contractual disputes. Let us rip the band-aid right off; the bad new is the credit card company can sue you and will win if they can produce the original contract with you and signed copies of the charges you made. The good news is that if they sue you, they are only entitled to actual damages. I do not know of a state that allows punitive damages in a contract suit unless the plaintiff can show fraud or bad faith. Therefore, if you owe them twelve hundred dollars, then if they prevail in a lawsuit they walk away with a judgment for twelve hundred dollars plus court costs.

What does this mean for you? Most credit companies are willing to settle the debt because litigation is costly.