| What You Should Know About Debt Settlement |
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| Written by Jessica Acosta |
| Saturday, 25 April 2009 15:51 |
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If you are currently in over your head, you may want to consider debt settlement. It can help reduce your debt to a manageable level and save you from bankruptcy. But it can be a daunting task if you dont take the time to learn what you need to know to successfully negotiate with your creditors. The following information will ensure that you are properly prepared to tackle this mission.
If you are currently in over your head, you may want to consider debt settlement. It can help reduce your debt to a manageable level and save you from bankruptcy. But it can be a daunting task if you dont take the time to learn what you need to know to successfully negotiate with your creditors. The following information will ensure that you are properly prepared to tackle this mission. You should be aware that debt settlement should only be used if you are truly desperate and would have to file bankruptcy without it. Although debt settlement can drastically reduce the amounts you owe, it costs you in other ways. Forgiven debt is considered a form of income, so you will have to pay taxes on it. And even though a settled debt looks much better on your credit report than a bankruptcy, it will still be detrimental to your scores. If your account is currently being handled by a collection agency, do not try to negotiate your debt with them. You should only negotiate with the original creditor. You will need to notify your original creditor that you do not have the financial resources to pay your debt, and that if they won't settle with you, you might have no choice but to file for bankruptcy. The mention of the word 'bankruptcy' should get their attention, because they know that if you file for bankruptcy they won't get any of their money back from you. Creditors usually will not agree to settle your account unless it is seriously delinquent. Some creditors won't consider settlement until an account is almost 180 days late, at which point they would normally "write off" the debt and sell it to a debt buying company for just a tiny percentage of the amount originally owed. Obviously, it would be better for the creditors to settle with you because they will never recoup nearly as much of their money from a debt buyer than they will from a settlement. Once the negotiation process begins, proceed carefully. You should send all correspondence via certified mail with a return receipt, and be sure to keep copies of everything. If you speak to anyone over the phone, document the date, time, and name of the person to whom you speak. Don't expect the negotiation to be completed overnight; it can take up to several months for an agreement to be reached. Once an agreement is finally reached, don't make payment without doing the following things first: Request a written copy of the settlement agreement from the creditor. Also, ask the creditor to provide you with a written statement that they will never sell your forgiven debt to a junk debt buyer. This is crucial, because you don't want the remainder of the debt to come back to haunt you later. You may wish to hire a professional debt settlement company if you would rather not negotiate with your creditors yourself. If you choose this option, don't hire a debt settlement service without investigating them carefully first to make sure they are legitimate. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Jessica Acosta is committed to providing you with truthful, unbiased information about debt settlement, credit repair, and similar issues. If you found this article helpful and want to read more from Jessica, please visit her website, Credit Repair and Debt Solutions. |
| Last Updated on Sunday, 26 April 2009 11:38 |