Debt Settlement

Living with a mountain of unmanageable debt can be distracting and stressful. Sometimes events beyond our control such as unemployment or illness result in a pile of debt that seems impossible to pay.

While it's not for everyone, (and the industry is largely unregulated) debt settlement may be worth considering. Debt settlement is not to be confused with debt consolidation (taking out one big loan to pay off a bunch of smaller, more expensive debts). Basically, debt settlement companies typically advise their clients to stop paying their bills and save up cash, which the company uses to negotiate lump-sum settlements. This contains information that will help you decide if debt settlement is for you. Topics include information and advice on:
How to choose best debt settlement company. In order to avoid scams you need to check out such things as company profile, accreditations, fees, costs and previous client feedback.

Understand the pros and cons of using a debt settlement company. All of these issues need to be considered before you decide to use a debt settlement company. We help you make an informed decision.

PROS:
• Possibly avoiding bankruptcy.
• Eliminating debt collection harassment as each debt is settled.
• Ability to make one single payment.
• Stop all those late charges and fees.
• Avoid lawsuit & other legal actions.
• Debt settlement companies offer a wide range of options. They typically negotiate with your creditors to settle your debt for less than what you owe and what you might have been able to negotiate.

CONS:
• Your credit score will drop.
• You may owe taxes as the IRS considers this forgiven debt, which is known as cancellation-of-debt (COD) income.
• Unless negotiated the account status on your credit report will be updated as "Settled" which creates a negative impact on your credit score.
• Some creditors are so resistant to working with debt settlement companies that they immediately "go legal," or file a lawsuit.
• The federal government doesn't regulate debt-settlement companies.
• Debt settlement is not cheap.
• Also, debt settlement typically isn't fast. The average debt settlement process takes close to two years.

Understand which debts you can and cannot settle. Credit card settlement is quite usual along with medical bills, gas/store cards, personal loans, etc. Tax debts, alimony, child support, mortgages, secured auto loans, and federal student loans cannot be settled by these commercial settlement programs.

Understand your obligations. Depending on your state’s law, your creditors may be able to come after you for the original balance of your debt. Additionally, nationwide, if you default on the settlement agreement, you can be sued. It is very important that once you get a settlement agreement, you follow through and make the payments.