Debt Information

Have you found yourself “over your head” in credit card debt? If so, debt settlement may be a good solution. It can slash a large percentage off of what you owe so that you can make your payments and avoid bankruptcy. But before you start contacting your creditors to negotiate, there is some information you should know first.

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.

If you are currently making payments on your account, you will have to stop if you wish to settle the debt. Creditors won’t consider settlement unless your account is seriously past due.

Once you start negotiating, make sure you send all correspondence to your creditor through certified mail with return receipt, and always keep copies of everything you send and receive. Also, document any telephone conversations you may have with the creditor.

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.

Tags: Debt //