What Is Debt Settlement Agreement

However, unscrupulous debt collectors use strange excuses to avoid a written agreement. You can say that it violates state or federal laws or violates company policy. There is no law prohibiting settlement agreements, in writing or otherwise. Company policies are rules that can be changed and have no legal force. Debt settlement is based on the idea that if you don`t make your payments, creditors are happy to accept less than the total amount owed. Thus, you avoid paying your debts directly and you make payments to the settlement company. The settlement company will then pay your creditor (provided they negotiate a settlement). There are two types of agreements that they can negotiate. In a lump sum settlement, the company makes a large payment to the creditor.