What if I change my mind after entering a debt settlement agreement? - CLEO (Community Legal Education Ontario / Éducation juridique communautaire Ontario) (2024)

FAQs

Can you cancel a debt settlement contract? ›

Money that a debt settlement company asks you to set aside in an “escrow” or “settlement” account belongs to you. You may cancel the account at any time, and the escrow company must refund all of your money minus any fees the settlement company legally earned. Over your head in debt? Struggling to pay your bills?

A settlement agreement is a contract; you cannot just change your mind and back out. Most grounds for setting settlements aside would invalidate a contract.

When you cancel, the provider will tell your creditors, so they might start charging you interest and late payment fees again, as well as expecting you to resume higher payments. You'll also have to deal with your creditors yourself again. Think about how you're going to cope with this.

Accurate information, such as a settled debt, generally can't be removed from your credit report until the reporting period ends. This period lasts for seven years from the date the account first became delinquent. You can dispute an error with the credit bureau if you think there's an error.

Consequences of Cancelling

Your debts will be reinstated. They will start incurring interest again, and it may be backdated. Your credit file will reflect that your Debt Agreement remains “not finalised” until the default is cleared after seven years. Your creditors can apply to make you bankrupt through court.

From the above Judgments, it is clear that the Settlement Deed cannot be cancelled unless either one of the elements of fraud, misrepresentation, undue influence or coercion is present. Such revocation is also possible only through a Civil Court."

Depending on the agreement you have signed, you may be able to void the agreement simply by rescinding a payment in some cases. However, it's important to remember that if you cancel the agreement, you'll still owe the debt you had when you started and will need to find a way to repay it.

If your debt is forgiven or discharged for less than the full amount owed, the debt is considered canceled for the forgiven or discharged amount that you no longer need to pay.

READ the contract you signed. It should describe how to stop your participation in the program. People often cancel debt consolidation programs. Notify the debt consolidation company that you are revoking it and any authorization you gave them IN WRITING.

While debt settlement may be worth a lower credit score for some, it may not be for everyone. You should avoid debt settlement if: You can afford your monthly payments. You haven't explored options like debt management and consolidation.

How do I clear my debt in settlement? ›

Debt settlement involves offering a lump-sum payment to a creditor in exchange for a portion of your debt being forgiven. You can attempt to settle debts on your own or hire a debt settlement company to assist you. Typical debt settlement offers range from 10% to 50% of the amount you owe.

The timing varies depending on individual circ*mstances and the lender's policies. Generally, individuals may need to wait at least 2 years after completing debt settlement before applying for a mortgage. During this time, it's essential to focus on improving credit and demonstrating financial responsibility.

READ the contract you signed. It should describe how to stop your participation in the program. People often cancel debt consolidation programs. Notify the debt consolidation company that you are revoking it and any authorization you gave them IN WRITING.

Once you have cleared the outstanding balance amount, obtain a no-objection certificate from your previous lender and submit it to the credit information agencies. Once you do this, the credit rating agencies will change the status of your loan account from 'settled' to 'closed'.

Debt settlement companies often charge expensive fees. Debt settlement companies typically encourage you to stop paying your credit card bills. If you stop paying your bills, you will usually incur late fees, penalty interest and other charges, and creditors will likely step up their collection efforts against you.