Texas Debt Settlement: Your Rights and Options

Debt can pile up quickly – an unexpected medical bill, car repairs, even everyday expenses. Before you know it, you’ve maxed out credit cards or taken out loans just trying to stay afloat. If you’re struggling with debt in Texas, know that you have options and legal protections. Getting educated on the debt settlement process is key.

An Overview of Debt Settlement

Debt settlement involves working with a credit counseling agency to negotiate down how much you actually owe creditors and debt collectors. The goal is settling debts for less than the full balance. This can save you money and help get you back on solid financial ground.Here’s a quick rundown of how debt settlement works:

• You stop making payments to creditors and instead put money in a secure account. This helps show “hardship” so creditors are more likely to settle.
• The credit counseling agency reaches out to creditors and negotiates a reduced settlement. They take their fee from the savings.
• You make a lump sum payment from your account to settle each debt.
• The creditor considers the debt paid and stops collections. Your credit report will still show the debt as “settled.”

Debt settlement can seem appealing, but there are risks like further damaged credit and getting sued. It’s important going in with full understanding of the laws in Texas.

Texas Debt Collection Laws

The Texas Debt Collection Act sets rules for professional debt collectors operating in the state. Key provisions include:

• Limits on harassment – Collectors can’t threaten violence, use profane language, call repeatedly, etc.
• No false statements – It’s illegal for collectors to lie or misrepresent debts.
• FDCPA still applies – Federal collector rules also apply in Texas.

Some shady agencies break these laws. Under the Debt Collection Act, you can sue violators for damages plus attorneys’ fees.

Your Rights in Texas Debt Settlement

The Texas Debt Relief Services Act specifically covers agencies offering debt management or settlement services in the state.Important rights include:

• Fee limits – Fees are capped at 17% of total enrolled debt. Additional “savings” fees also have limits.
• Written contract – You must get a written service agreement listing all fees.
• Trust account – Agencies must keep client funds in a separate trust account.

Reputable credit counseling agencies will follow all these rules. Be very cautious signing up with any agency that doesn’t.

Watch Out for Texas Debt Settlement Scams

While debt settlement can help in certain situations, the industry does have its shady characters. Be on guard for potential debt relief scams in Texas:

• High upfront fees – Legit agencies collect fees only after settling debts.
• Pressure sales tactics – Don’t let an agency push you into signing.

• “Guaranteed” promises – No one can guarantee debt settlements or make debts magically go away.

If an agency ever asks you to stop paying creditors directly, that’s a huge red flag. Ceasing payments will trash your credit – and creditors can still sue.

Alternatives to Debt Settlement in Texas

Debt settlement is just one option on the table. Depending on your specific situation, you may find better relief through:

• Credit counseling – Nonprofit agencies provide free education and advice on managing debt.
• Debt management plans – Credit counselors negotiate lower interest rates and monthly payments.
• Bankruptcy – For those truly unable to pay, Chapter 7 or Chapter 13 bankruptcy discharges many debts.

Be sure considering all alternatives before committing to the debt settlement process. And don’t hesitate reaching out to a consumer protection attorney if you have any disputes with creditors or collectors. Texas has strong laws, but exercising your rights often requires legal help.