Debt settlement is regarded as a viable option by most consumers, when they are not able to make the usual monthly payments for instance on credit cards or when they are only making minimum payments resulting in the accumulation and piling up of outstanding amount.
The consumer or a debt settlement company may then negotiate with your creditors for settling the outstanding debt with a part of the overall sum you owe to your creditors. Opting for debt settlement over the other options could be a difficult choice for you to make. However, you should know a few vital things about debt settlement before you finally, make the choice. Browse through debt settlement reviews for a clear understanding.
Debt Settlement May Mean Substantial Cut in Existing Debt
Debt settlement generally allows you to slash your debt amount significantly. Although officially credit card industry will not be advertising this, but in reality, they are readily slashing your balance by almost 20 % to 75 %
Debt Settlement Could be Unattainable on Your Own
It is a challenging task to try to settle your debts independently. It is advisable to seek the expert services of an experienced debt settlement company. If you are on your own, your creditors would try their best to make you repay the exact amount you owe. So it is best to turn to a professional and reliable debt settlement company so that they can help you in arranging the settlement.
Debt Settlement Services Never Come Free of Cost
You cannot seek professional and reliable debt settlement services without paying them applicable charges. You need to pay for expert debt settlement advice and services even if you are attached to a non-profit organization. You must clarify about the fee model before you come to an agreement. Verify if the fee structure works for you. You should know that each company has its own unique fee model.
Debt Settlement Possible If You Are Really Behind on Your Outstanding Amount
If you happen to be current on your debts, creditors generally refuse to interact with you no matter how overburdened you are financially. Bankruptcy under Chapter 7 cancels most unsecured debts, and is hence very favorable, but it is much harder to qualify for and secure Chapter 7 bankruptcy. If you qualify only for Chapter 12, a debt settlement firm could help you navigate past the murky waters of bankruptcy.
Taxes Can Be Levied on Debt Settlement
If the forgiven debt balance is more than $600, you are legally needed to pay taxes on them, as you had spent the funds in the form of un-taxed money when the original purchases were made.
For-Profit Debt Settlement Firms Are Not Legal in Some States
If you are a resident of Maine, New Mexico, Arizona, New York, Mississippi, New Jersey, Hawaii, Georgia, West Virginia, Wyoming or North Dakota, state rules make the operation of for-profit debt settlement firms illegal. Hence, you must check whether the firm you are hiring is working within the bounds of the law or not.
The Process Is Never the Same
Before signing with a debt settlement company, you must go through all their fine-print and understand the process of how they intend to communicate and negotiate with creditors, and the methods they will undertake to pay off the debts, and whether all parties have agreed to the same. There is no hard and fast mode of operation, so nothing can be taken for granted.
We can safely conclude that you should do your homework diligently. Weighing your options for tackling overwhelming debt is a good idea. It is a fact, that in business everything seems to be negotiable. You can easily get significant discounts provided you know whom to approach with the request and also, if you know how to request. In case of falling back on credit card payments, you can negotiate. If you have the necessary guts and knowledge you could drastically cut down your outstanding debt amount by at least 50 % to 70%.
Author Bio: Ava Hutton is presently working with a charitable firm to provide free debt relief advice and debt settlement reviews for those in need. She has worked in the private finance sector in the past, and now enjoys reading and blogging.
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