Debt Settlement
What Is Debt Settlement?
Debt settlement, otherwise known as debt negotiation, is one method of debt relief assistance. It is a way of negotiating with your creditors to have some agreed-upon amount paid in lieu of the full amount, usually 35% to 75% of the debt. Some folks have done even better than this. As unbelievable as it might sound, it is a perfectly legal credit card debt elimination method for those that are in deep financial trouble and looking for an alternative to bankruptcy.
Debt settlement can reduce your debt significantly. The further behind you fall in your payments, the more eager the companies are to negotiate with you! Once you are in arrears by at least 3 to 6 months, you can begin to think about negotiating. Even if you are in hardship, they will not discuss this with you. It’s just not the way they operate. Debt settlement companies will not put you in their program if your accounts are in good standing, as they know the creditors just won’t negotiate that way.
There is only one potential downside to debt settlement, if you can call it that. You may have to pay taxes on the part of the debt that is forgiven. However the savings far outweigh the taxes!
You can hire a debt consolidation company, debt management company, or debt settlement company to handle your debt negotiation programs for you. However, many people have questioned whether reliable debt settlement companies even exist today. These debt management companies usually charge excessive fees, and the FCC is currently investigating complaints of misleading information and unethical practices. When you’re trying to reduce your debt, the last thing you need is another large bill! Not only this, but in some cases, they can mismanage accounts. It is very difficult to plan for the future when your finances are uncertain, and these plans are long-term and quite expensive. The fall-out rate is extremely high (up to 75%) as people start off with the best of intentions, but are not able to manage the monthly payments. That is more wasted money, as you will lose whatever you have paid them, only to find your accounts are still due.
It is certainly cheaper to handle your own debt negotiation. Read up on do-it-yourself debt settlement.
You may try to negotiate your debts, and ultimately decide to do a bankruptcy anyway. There are several debt relief assistance programs that may be used over the course of your debt reduction plan. Bankruptcy is not a small step, and you need to make sure you have planned well for it, meaning that you won’t have trouble in bankruptcy court. You’ll also want to protect your assets, which requires a bit of planning and definitely requires good legal advice. In my experience, there aren’t many lawyers available that help low- to middle-income people with asset protection. That kind of legal help seems to be only for the wealthy! So you might have to do some homework. In any case, debt negotiation may be a tool you can use to deal with creditors in the meanwhile.