A ideal debt settlement solution is for someone who has overwhelming debt and wants to avoid bankruptcy, but is unable to fully repay their debts due to a legitimate financial hardship. If you can read, you can settle your debts yourself.
What is debt settlement?
A debt settlement is an agreement between you and your creditor to settle a debt for less than you owe. This is typically done in consideration of a legitimate financial hardship, such as loss of income, illness or death in the family, divorce, medical bills or other unexpected expenses.
Do creditors really settle? Why would they settle for less?
Creditors often agree to a settlement when their customer is experiencing financial hardships because it is better to receive a partial payoff rather than losing the account to bankruptcy.
Is this debt consolidation?
No. Debt consolidation simply reorganizes your debts from multiple debts into one single debt account, often times through a second mortgage or mortgage refinance. This turns your unsecured, negotiable debt into secured, nonnegotiable debt. So, if you are unable to repay the consolidated debt, you may risk the bank foreclosing on your home. Debt settlement, on the other hand, is simply you negotiating with your creditors for a reduction in the amount it would take to settle your debt.
How soon can I be out of debt?
This depends a lot on how much debt you have, how much you are able to save and several other factors, like the types and statuses of debts you are trying to settle. Typically, someone trying to negotiate settlements can be out of debt in 36 months or less.
How much money can debt settlement save me?
The results we've seen vary, but a typical debt settlement is usually for about half of the outstanding balance of the debt. Of course, this depends on a lot of factors, such as the type of debt, status of the debt and your ability to negotiate effectively, just to name a few.
How do I know debt settlement is right for me?
Typically, debt settlement is ideal for someone who has overwhelming debt and wants to avoid bankruptcy, but is unable to fully repay their debts due to a legitimate financial hardship. A legitimate financial hardship may be a loss of income, illness or death in the family, an expensive medical emergency or condition, divorce, emergency home or automobile repairs and many other situations that create unexpected expenses.
Should I consider bankruptcy?
Bankruptcy is a legitimate source of debt relief, and it can really help some consumers get a fresh start in life. However, many consumers want to avoid bankruptcy because of the stigma associated with bankruptcy. If you feel that your financial situation is severe enough to consider bankruptcy, you should speak with an attorney who is licensed to practice law in your state and has experience in bankruptcy law.
I heard that cancelled debt is taxable income. Is this true?
Cancelled debt may be considered taxable income unless you were insolvent at the time of the settlement. However, even if you're not insolvent at the time you settled your debt the taxes you would owe amount to only a fraction of the money you will save with the settlement. Tax code changes from year-to-year, so you might want to consult a tax professional or call the IRS if you have concerns or questions about this issue.
Will this help my credit?
No. Debt settlement typically has a negative impact on credit. However, this impact is temporary and you can rebuild your credit once you've settled your debts.
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