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Can I be sued after paying a debt settlement amount? – Luis

This actually happened to a friend of a friend, but I need to know the answer as I intend to settle accountes in the future.

What happened was that person A had an old debt of $10,000 with a collection agency. Person A agreed with the collection agency to pay $4,000.00 to pay off the account. Person A paid the $4,000.00.

Collection agency then turns around and sues Person A for the remaining $6,000.00. Is this even legal? If an agreement was already made on paper to settle the account for less than what is owed, then that frees Person A from being sued for the rest, correct? Please clarify this as I intened to settle debts out in the future. Thank you very much!

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Luis

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  • http://www.consumerrecoverynetwork.com/ Michael

    Hi Luis,

    Settling debts with creditors and collectors occurs frequently.
    If the settlements are properly documented and the terms met, it is not all that common to see further collection efforts on the same account (given how many settlements happen around the country), and rarer still for additional collection efforts to reach the level of a lawsuit after a properly documented and funded settlement.

    In all my years of experience with settlements I have only seen one instance of further collection action that was not able to be quickly handled by providing a copy of the settlement agreement and proof of funding. It was an account where the remaining balance was later placed with an in state collection attorney. It was ultimately dealt with, but was neither fun, nor something that should have ever happened.

    Documentation is your friend. If you are seeking settlements – always get deals in writing prior to funding date and meet all terms outlined in the agreement. Keep documents in a safe place.

    I do not know the particulars or the end result of your friends situation, but in my experience it is a rare occurrence.

    • Fitz

      I actually see this a lot. We almost routinely make FDCPA claims and recover sums for clients to whom this happens. You got to have documentation of the settlement terms and proof of compliance with the settlement.

  • http://www.consumerrecoverynetwork.com/ Michael

    Hi Luis,

    Settling debts with creditors and collectors occurs frequently.
    If the settlements are properly documented and the terms met, it is not all that common to see further collection efforts on the same account (given how many settlements happen around the country), and rarer still for additional collection efforts to reach the level of a lawsuit after a properly documented and funded settlement.

    In all my years of experience with settlements I have only seen one instance of further collection action that was not able to be quickly handled by providing a copy of the settlement agreement and proof of funding. It was an account where the remaining balance was later placed with an in state collection attorney. It was ultimately dealt with, but was neither fun, nor something that should have ever happened.

    Documentation is your friend. If you are seeking settlements – always get deals in writing prior to funding date and meet all terms outlined in the agreement. Keep documents in a safe place.

    I do not know the particulars or the end result of your friends situation, but in my experience it is a rare occurrence.

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