Debt Settlement can Provide Debt Relief and Consolidation.
Debt settlement programs help debtors reduce outstanding debt through negotiation with credit card companies and lenders of unsecured loans. These might include medical bills, department store or gas cards, personal loans, student loans, repossessions and accounts in collection.
Oftentimes, debt settlement companies can reduce owed debt by as much as 60-percent. However, these organizations typically charge a start-up fee, along with monthly service fees. Reputable companies charge around 15-percent of the amount of debt owed. If the organization is able to obtain a 60-percent reduction in debt and charges 15-percent, you will save 45-percent
In some instances, the Internal Revenue Service may charge tax on the savings. If you owed $100,000 and negotiated a 45-percent reduction, you might be assessed a capital gains tax on the $45,000. Therefore, it is imperative to obtain tax counseling prior to entering into debt settlement negotiations.
Debt settlement can be a good alternative to bankruptcy. Although debt settlement can affect your credit rating, it is not as damaging as filing bankruptcy. Both personal and business bankruptcy can remain on your credit report for as long as ten years and prevent you from obtaining credit in the future. Additionally, bankruptcy affects your car and home insurance rates. In some instances, it can affect your ability to gain employment.
Debt settlement companies typically do not work with mortgage lenders, secured loans, delinquent taxes or child support.
There are plenty of companies who claim they can negotiate your debt. However, due diligence should be conducted prior to signing a contract. Conduct research online by typing in the company's name. The Internet makes it relatively easy to locate complaints filed against organizations engaging in unprofessional behavior.
Also check with the Better Business Bureau at www.bbb.org. Experts suggest working with reputable debt settlement companies in good standing with the BBB.
Once you have chosen a debt settlement company, you will need to provide them with pertinent financial information. Be prepared to provide personal information such as your social security number and date of birth, along with account numbers and balances owed for all accounts.
It is important to realize creditors do not have to negotiate with debt settlement companies. Working with a reputable organization will improve your chances, as established debt settlement agencies are well-established in the credit industry. Some creditors are stubborn and will persue the matter in court while others are happy to get whatever they can.
Debt settlement programs last between one and three years, depending on the amount of debt owed. During this time, debtors are not allowed to take on any new credit. Payment plans can be difficult to adhere to over the long-term. However, for those who are serious about obtaining financial freedom, debt settlement could potentially be the best decision they could make.
Before making a final decision, take time to conduct research on various debt reduction methods. In addition to debt settlement, consider credit counseling, debt consolidation or negotiating debt on your own.