Debt Settlement.
It may seem like a practical solution to your debt. Know what you are getting in to and your options.
How Debt Settlement Works:
- You call a debt settlement company and tell them about your situation.
- You provide them with your debt information. The debt settlement company will work out a lower monthly consolidated payment for you. This payment will go to them and not your creditors.
- Your monthly payments are placed in to a savings account until the funds reach a sum that the debt settlement company feels is enough to start negotiating settlement with your Creditors. They then start calling your Creditors.
- If amounts are agreed upon, Creditors will get paid. This could take months or years.
The Problems:
- If you are concerned about your credit — this is months or years of continual negative marks.
- Creditors do not have to settle and may instead start Court actions.
- Creditors may agree to small payments and STILL start Court action.
- Debt that is written off is taxable.
Our office has meet hard working families who have hoped to pay their debts through debt settlement agencies. The programs did not work for them and they called our office seeking bankruptcy relief. This is typically after they have paid 1000’s to the debt settlement company.
People who are overwhelmed by debt need to explore all their options carefully. Families must consider what options are best for them now and in the future. It is also important for debtors to be realistic about their financial situations. Even if companies are willing to settle some of your debts, will you be able to pay the settled amounts?