If you’re over your head with debt, debt settlement is one option for finding relief. This involves negotiating credit card debt and other loans to pay less than you owe. However, it can require time and skilled negotiation tactics, so many people choose to work with a debt settlement company.
However, you might wonder if canceling debt settlement contracts is possible. Read on to learn your options.
Debt Settlement Company Red Flags to Consider
However, when it comes to debt settlement companies, consumers tend to have mixed experiences. A reputable company will be licensed in your state and may be limited by specific state laws. They should talk to you about your situation and how the debt settlement process works in detail.
They should not take money from you before doing any work (commonly, there can be monthly fees before work is done), which may be a red flag. Most importantly, they should also discuss their fee structure and potential outcomes of hiring their services.
Some companies, however, are less transparent about their costs, practices, and potential results. Some are really only call centers that outsource much of the work.Â
According to the Federal Trade Commission (FTC), signs of a shady debt settlement company include:
- Demanding payment upfront before any services have been provided
- Charging excessive fees
- Guaranteeing certain results, which is not possible
- Solicitation (i.e., cold-calling you)
- Promoting new government debt relief programs or loopholes to get you out of debt
- Not explaining the consequences of ceasing contact with creditors
- Signing you up for their services without going over the plan in detail
Remember that a legitimate debt settlement law firm will likely not operate that way. A law firm typically handles all aspects of debt settlement from beginning to end. This is a better process for success.
How to Cancel a Debt Settlement Contract
If you signed up for a debt settlement program but are experiencing any of the challenges mentioned above — or you aren’t happy with the company or terms — know that it is possible to cancel your contract. Here are the steps you should take:
1. Review Your Current Debt Settlement Contract
First, review the contract you signed with the debt settlement company to see the procedures for canceling. You often need to notify them in writing (sometimes, failure to pay voids your contract). It’s likely you can’t recoup any fees you’ve paid thus far, but the money you’ve set aside in your escrow or other savings account may be yours to get back. Always ask for an accounting and refund in writing.
2. Notify Your Bank
To avoid having any more fees taken out of your account, you should immediately contact the debt settlement company to cancel the agreement in writing. For example, suppose your plan with the debt settlement company involves automating debit payments from your personal bank account. In that case, you should call the bank to let them know you’ve canceled that arrangement and ask to stop the automatic monthly payments.
3. Hire a Debt Settlement Lawyer
You shouldn’t wait to act once you cancel your debt settlement contract. It’s essential to follow up on your outstanding debts immediately and pursue a solution to resolve your debt.Â
You might feel frustrated and unsure who to trust to help you resolve your debt after a bad experience. Know that a licensed attorney has different ethical obligations to you as a client, which could be a better debt relief source. If you don’t handle the debt ASAP, you could be sued for the funds you owe, especially if you were in another program and the debts were unresolved.
And if your creditors get a judgment against you in court, you could have your bank accounts frozen, wages garnished, liens placed against your property, and other dire consequences. Contact a debt help attorney right away if this is happening.
That’s why it’s a good idea to enlist the help of a debt relief lawyer immediately before or after canceling a debt settlement agreement. If you have pending settlements or are still defaulting on your debt, you can talk to a lawyer about how to proceed.
An experienced debt relief lawyer can review your financial situation, discuss your options, and provide you with a good strategy to get the debts resolved once and for all. Plus, they can field calls from debt collectors and debt collection law firms and take that pressure off you.Â
Tayne Law Group is an award-winning debt relief law firm that has been advising clients on how to handle their debts for more than two decades. We’ve successfully negotiated countless debt settlements and have the knowledge and debt negotiation skills to get you the best deal possible.
Exploring Your Options
Of course, settlement isn’t always the best option for every person, and that’s why an experienced debt settlement attorney can review the options available to you. Not all debt and financial situations are alike; someone who understands different strategies to resolve debt can often make a difference.
Filing for bankruptcy or pursuing another debt relief option might make more financial sense. Our experienced lawyers can help walk you through the best course of action that works for you, your family, and your finances.
We provide a free consultation so you can learn about our services and how we can best help. Get in touch right away by calling us at (866) 890-7337 or filling out our short contact form to schedule a free phone consultation. All conversations are completely confidential, and we never share your information.
FAQs
Yes, you can back out of a debt settlement contract. However, doing so may have consequences, such as forfeiting any fees you’ve already paid or facing continued collections from your creditors.
To cancel a debt collection contract, review the terms and conditions of your agreement. Typically, the cancellation process will be outlined. You’ll likely need to provide the debt collection company with written notice specifying your intent to terminate the contract.
If you cancel your debt relief program, you may:
Lose any fees you’ve already paid to the service provider.
Become responsible for repaying your full debt, possibly with added interest or fees.
Face continued or intensified collection efforts from your creditors.
Potentially harm your credit score further.
