How to Settle a Debt in Michigan

Legal Expert
Sarah Edwards, BS

Sarah Edwards is a professional researcher and writer specializing in legal content. An Emerson College alumna, she holds a Bachelor of Science in Communication from the prestigious Boston institution.

Edited by Hannah Locklear

Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

When you settle your debts in Michigan ^^

Summary: If you’re facing a debt lawsuit, you have 21 days to respond to the lawsuit in Michigan. Even if you plan to settle the debt before court, you should file an Answer to the case to avoid a default judgment. Next, you can use SoloSettle to send a settlement offer to kickstart negotiations. Finally, make sure to get your settlement agreement in writing.

Debt is a fact of life. Over three-fourths of Americans carry debt—from credit card balances to auto loans to mortgages. And if you’re like most Americans, you work hard to pay your debts, but it only takes one setback to let things get out of hand and make you lose control of your finances.

If you cannot keep up with your loan payments, your creditors will call you and send you letters. If you cannot get back on your repayment schedule, they may charge off your debt and sell it to a collection agency or file a debt lawsuit against you.

Creditors and debt collectors who successfully win a debt lawsuit against you will obtain a judgment. A judgment allows them to garnish your wages or freeze your bank account until you fully repay your debt. You’ll lose control of your finances, and a significant portion of your income may go toward debt repayment.

Nobody wants to face a debt lawsuit, but you absolutely do not want a judgment. You can stop a lawsuit from proceeding further by repaying or settling your debt before the court date.

Debt settlement is the best option if full repayment is outside your reach.

In this article, we’ll explore everything you should know about how to settle a debt in Michigan. Let’s get right to it.

Follow these 3 steps to settle your debt in Michigan

If you’re interested in debt settlement, there are three steps you should follow:

Respond to the debt lawsuit with an Answer.
Make an offer to start negotiations.
Get the settlement agreement in writing.

Below, we’ll break down each of these steps in detail. Don’t like reading? Check out this video to learn more:

1. Respond to the debt lawsuit with an Answer

Even if you plan to settle the debt before your court date, you should still respond to the lawsuit. This gives you time to work out a settlement without worrying about a default judgment being ordered against you. Let’s explain.

Your creditor or debt collector will begin the legal process against you by filing a Complaint with the local court in Michigan. You’ll receive a copy of the Complaint along with a Summons to appear for the case.

A Complaint lists the claims your creditor has against you, including the debt amount and any accumulated interest.

In Michigan, you have 21 days to respond to a debt lawsuit before you lose automatically.

Many people don’t realize that the court will grant a default judgment to the creditor or collector if you fail to respond to the Complaint in time. A legal response, known as an Answer, is your defense to the lawsuit.

In your Answer, you must respond to each claim listed in the Complaint and list your affirmative defenses. For example, you might state that there is lack of jurisdiction over the case, improper validation of the obligation, or that the statute of limitations on the debt has already expired.

While you intend to repay the debt in part or in full before the due date, an Answer stops a default judgment against you if your efforts fail. It allows you the chance to defend yourself in court.

You can draft and file an Answer to your debt lawsuit in Michigan with SoloSuit, online, in minutes.

Respond with SoloSuit

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2. Make an offer to start negotiations

Your next step is to figure out how much you can offer to pay off the debt and how much the creditor or debt collector might accept. Debts settle for a broad range of amounts, so you may have to take a close look at your finances and do some research on your creditor to determine a fair amount to offer.

1. Calculate how much you can pay.

Calculate how much money you have left over each month after you pay for the basics: food, shelter, utilities, and transportation. Subtract other costs that must be paid like other non-delinquent debt. Add the difference to any savings you have available to pay off this debt. The sum is the amount you have available to pay off the debt.

Amount available to settle = (monthly income – monthly costs) + savings

2. Determine how much you think the creditor or collector will accept.

Debts settle within a broad range of amounts. They can settle for amounts ranging from 1% to over 100% of the total amount of the debt. According to America Fair Credit Council’s Regan Report, the average consumer can reach a debt settlement of 50% when working with a debt settlement company.

That being said, we recommend offering at least 60% of the total value of your debt.

This amount is large enough to show your creditor you’re serious about settling the matter. They’ll weigh a potential settlement against the cost of pursuing a judgment and decide whether it’s more cost-effective to accept a lesser amount in a lump sum.

Consumers who cannot find enough money for a 60% settlement should explain their circumstances. Sometimes creditors and collection agencies will accept less if they understand a consumer is going through a difficult time.

You’ll probably go through several rounds of negotiation before reaching a deal. Don’t accept any agreement that you know you can’t fulfill. If you do and don’t make your payment, the lawsuit will continue—and they’ll probably win.

Here’s an idea of what you could say in your initial offer:

“I see you’re suing me for [$___] for [case number]. I don’t have that kind of money and I don’t agree with the amount. But I do have [$___] that I can pay within 30 days to settle the debt in full. Let me know if you accept.”

SoloSettle sends and receives debt settlement offers for you.

3. Get the settlement agreement in writing

Once you reach a debt settlement agreement, make sure to get it in writing before transferring any money. A written contract ensures that you and the creditor or collector understand the terms and conditions of the deal and that you both agree to them.

Your agreement should specify how much you’ll repay, when the payment is due, and how you’ll pay. It should also stipulate that the creditor or collector waives the right to the remaining balance and will take no further collection activity against you.

We recommend that you notarize the agreement. A notarized agreement ensures there is a witness to your signature on the contract and provides an additional legal layer of protection.

Here is a debt settlement agreement example, for your reference, with a preview attached below:

Debt Settlement Agreement Example

SoloSettle manages your debt settlement agreement documentation for you.

Now that you’re familiar with the debt settlement process, let’s walk through an example of how to settle a debt in Michigan.

Example: Lisa receives a Summons and Complaint in Michigan, notifying her that she is being sued by LVNV Funding for an old credit card debt oft $2,000. Lisa can’t afford to repay the entire debt before her court date, so she decides to attempt debt settlement. She uses SoloSuit to draft and file an Answer into the case before Michigan’s deadline, which is 21 days. Next, she takes a look at her finances to determine how much she can afford to pay off now, which is $1,200 (60% of the debt). She uses SoloSettle to send an initial offer of 40%, or $800. This gives her room to negotiate. LVNV Funding sends a counteroffer, and after a few rounds of negotiating, they agree to settle for 55% of the debt, or $1,100. After SoloSettle transfers Lisa’s payment to LVNV Funding, the case gets dismissed. Lisa saves money, avoids going to court, keeps her financial information safe from collectors, and gives herself a financial restart.

What are Michigan’s debt collection and debt settlement laws?

Michigan adheres to the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from taking specific actions, including:

Calling consumers before 8 a.m. or after 9 p.m. concerning a debt.
Telling a debtor they’ll go to prison if they don’t pay a debt.
Harassing a consumer at their place of employment.
Contacting a debtor more than seven times over a seven-day period.
Using threatening language to convince a debtor to pay an obligation.

In addition to the FDCPA, Michigan has debt collection rules under MI Comp L § 339.915 (2021). The statute prevents debt collectors from:

Using communications that imitate a court form or judicial process.
Making misleading statements concerning a debt.
Misrepresenting themselves as someone else, like a law enforcement officer.
Threatening violence in association with nonpayment of a debt.
Using a postcard to communicate with a debtor.

Michigan has a statute of limitations that limits the time a debt collector has to pursue a debt lawsuit. Under MI Comp L § 600.5807 (2021), creditors can pursue legal action for written and oral contracts for six years. The MI Comp L § 600.5813 (1996 through Reg Sess) sets a six-year limitation for debts on account.

What’s the best debt settlement company?

SoloSettle, powered by SoloSuit, makes negotiating a debt settlement easy by providing a structured process.

You can use our web-app to send and receive offers from collectors. It will draft offers for you and protect you from the potential lies and bullying of debt collectors. Most importantly, SoloSettle makes sure all of the proper legal language is included to protect your rights when communicating with the creditor or debt collector.

When a settlement agreement is reached, SoloSettle manages the settlement agreement documentation for you and protects your sensitive financial information from the collectors, preventing them from over-charging you.

So, what's the best debt settlement company in Michigan? We’ll let you decide on this one. Many consumers prefer SoloSettle over traditional debt settlement companies. Here’s why:

You can settle debts of any size with SoloSettle. Many debt settlement companies require you to have a debt over $15k.
SoloSettle actively attempts to settle your debt, whereas many debt settlement companies take a more passive role, waiting for settlement offers to come to them.
SoloSettle is offered by SoloSuit, a trusted brand and a legitimate company. Many traditional debt settlement companies are actual scams.
SoloSettle has legal defense built in with SoloSuit. While settling, you can use SoloSuit to block lawsuits if you need. Most debt settlement companies don’t provide legal defense; if you’re sued for a debt you are on your own.

Not convinced? Check out this review from a real SoloSettle customer:

“I'm very thankful for SoloSettle.. Having a third party negotiate the settlement was instrumental in resolving this case and saved me from two giant headaches: 1) I didn't have to deal with the plaintiff's lawyer and 2) I didn't have to go to court. I also love that the payment was processed through SoloSettle. I was nervous about sharing my personal financial data with the other side, but SoloSettle protected that for me. I hope I never get sued again, but if I do, I would use SoloSettle again in a heartbeat.

SoloSettle really saved me a ton of time and heartburn and kept me from having to be my own lawyer in court.”

Below are other debt settlement companies you can trust in Michigan:

Freedom Debt Relief: Since 2002, Freedom Debt Relief has helped thousands of consumers resolve over $10 billion of unsecured debts. To qualify for its programs, you must have at least $10,000 in debt and commit to making monthly payments toward settlement. Most people finish the program within two to four years.

National Debt Relief: Another large provider of debt settlement services, clients who enroll in National Debt Relief’s program can expect to complete it within two to four years. Fees for the company’s services range from 15% to 25% of the total value of a consumer’s debt.

Century Support Services: Another debt relief company that’s popular with customers. Since 2012, the organization has helped customers resolve more than $1.7 billion in debt. Century Support Services charges clients 18% to 25%, depending on how much debt they seek to settle.

Accredited Debt Relief: Helps consumers with multiple outstanding obligations resolve their debts. Programs last two to four years and cost 15 to 25% of the debt’s total value. Individuals who qualify for the program can see a significant reduction in their obligations.

What are the best ways to contact a collector?

If you’re ready to settle your debts with a debt collector, you can contact them via phone, email, or letter.

We recommend email since it’s quick and provides a written record of your communication with the collector.

However, you can call them if you’d rather speak directly with the debt collector. Calling might be a good idea if you’d like to explain a job loss, illness, or other extenuating circumstances.

If you decide to cal,l we recommend recording the conversation. Under MI Comp L § 750.539c, you’ll need to obtain consent from your debt collector before beginning the recording.

Keep in mind that debt collectors usually prefer to speak over the phone. They are professional negotiators, and they know how to manipulate and intimidate consumers. This is why it’s important to get proof of any phone conversations you have with collectors.

FAQs about debt settlement in Michigan

Do you have further questions about debt settlement in Michigan? Here are a few of the top questions we hear.

Q. What is a reasonable offer to settle a debt?

We recommend starting the debt settlement process with an offer of at least 60%. That’s enough to show your creditor you’re ready to settle, and they’ll likely be more willing to accept it than a stream of monthly payments. If you can’t provide that much, offer what you can.

Q. How long before a debt becomes uncollectible in Michigan?

The statute of limitations for debts is six years in Michigan. After that period, your creditors lose the right to obtain a judgment against you. However, they can still report your account adversely to the credit reporting bureaus and may continue to call or write to you.

Q. Is it better to settle a debt or pay it off?

It’s better to pay off your debts completely. However, settling your debt can help you avoid a potential judgment if you're facing a difficult financial situation. Once you settle the obligation, you’ll be free from further collection activity.

How to get debt relief in Michigan

SoloSuit has many articles concerning debt settlement, debt relief, and Michigan collections laws. Here are a few you can review.

Settling your debt is possible

A debt lawsuit is not the end of the world. Learn how debt settlement works and begin the process with your creditor. Start by filing an Answer, then start your negotiations. Once you have a deal, make sure to get it in writing.

SoloSuit can help you in the debt settlement process.

What is Solo?

Solo makes it easy to resolve debt with debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt. SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

SoloSettle can help you contact your debt collector or creditor and negotiate the debt to settle for less, all online. It simplifies and streamlines the process to settling your debt.

No matter where you find yourself in the debt collection process, Solo is here to help you resolve your debt.

>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

>>Read the NPR story on SoloSuit. (We can help you in all 50 states.)

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The Debt Hotline

Hosted by Team Solo, The Debt Hotline breaks down debt and personal finance topics with help from attorneys, financial experts, and industry pros. We respond to real questions to help you navigate debt with knowledge and courage.

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"Finding yourself on the wrong side of the law unexpectedly is kinda scary. I started researching on YouTube and found SoloSuit's channel. The videos were so helpful, easy to understand and encouraging. When I reached out to SoloSuit they were on it. Very professional, impeccably prompt. Thanks for the service!" - Heather