Weighing the Benefits of Debt Settlement

settlement cons

YOU NEED TO BE SERIOUSLY DELINQUENT IN YOUR PAYMENTS IN ORDER TO SETTLE. SO IF YOU ARE UP TO DATE WITH YOUR PAYMENTS, YOU RUIN YOUR CREDIT BY NOT PAYING!

NUMEROUS LATE MARKS ON YOUR CREDIT REPORT.

LATE AND OVER THE LIMIT FEES.

CONSTANT COLLECTION CALLS, DAY AND NIGHT.

BALANCES CONTINUE TO RISE DRAMATICALLY.

RAPID DECLINE OF YOUR CREDIT SCORE.

YOU CAN BE SUED PERSONALLY AT ANY TIME RESULTING IN WAGE GARNISHMENTS, LIENS OR COURT APPEARANCES.

CREDITORS WILL FILE A1099 FORM WITH THE IRS AND YOU WILL HAVE TO PAY INCOME TAX ON WHAT EVER AMOUNT OF DEBT YOU'RE FORGIVEN.

The amount forgiven is considered income by the IRS. So you will pay taxes on the forgiven amount.

kwd of @ Jul 18, 2008 05:36:10 AM

Reply to John of MD

In repsonse to John from Maryland post.

I guess a person could try and do it themselves, I did. It took me many hours of work to get a horribly high settlement offer. The offer then was only good for a short time, AND I had to pay the settled amount in 20-25 days. As you can guess, it was not in my best interests.

I did use a settlement company. I know I paid a fee, but you pay a fee to a realtor to use their expertise, time, abilities to work for you. Same here. I factored in the cost of their fee, as well as what I could reasonibly expect to settle for. Once I did the math, I still saved about 46% off of what I owed, PLUS I could continue to work(i.e. make money) while someone else handeled everything for me.

My experience was good. I did my research, others should as well.Settlement is in the consumers best interest.

Respectfully, Greg

Greg in Texas of TX @ Jul 17, 2008 13:33:38 PM

Just the (speculated) facts.

Pay 14% for a middleman to get you a 37% discount on what you owe, it says. I'll bet a bunch of these problems for a bunch of these clients were driven by medical-related fees where the 37% (from retail) discount was probably already granted to OTHER patients who had insurance running a different kind of professional interference up front. Just guessing.

Daniel David of NM @ Jul 17, 2008 13:17:23 PM

There is a DIY option

It's nice to see someone speak up for debt settlement, especially in these hard economic times. However, just about anyone can do this without having to hire a company and paying their service fees. There are low-price kits you can purchase that will explain how to save up and negotiate your debts on your own. Just do a search for "diy debt settlement kit" to find a one.

John of MD @ Jul 17, 2008 10:58:46 AM

A refreshing piece...

The Debt Settlement industry as a whole has taken a beating recently because of some agencies poor practices. It's refreshing to see a piece that is factually written and an author who took the time to gather information before firing from the hip.

Excellent article, and excellent information.

Consumers entering settlement programs are not bad people, they are just stuck in a bad spot. They are being proactive in resolving their debts instead of hiding from them. Most banks have a grasp on that and deal quite well with debt settlement companies to resolve the accounts.

m2aclark of TX @ Jul 16, 2008 17:56:52 PM