Settling debt is not easy. Creditors usually want all the money owed to them. Economic circumstances sometimes makes that impossible and debt settlement becomes an option. Individuals can either attempt to settle debts on their own, or use a debt settlement companies. Before engaging the services of a debt settlement firm, make certain you are dealing with a reputable company.
Self-Repair
One way to settle debt is by attempting it yourself. Although there are debt settlement companies available, nothing prevents you from contacting your creditors on your own and trying to work out an arrangement. Doing research beforehand helps you to negotiate the best deal. Talk to others who have settled debt, either on their own or with the help of debt settlement companies. Find out the settlement terms, allowing you some idea of what to expect. When you contact the creditors, make sure they provide terms and conditions involving the debt settlement in writing. Try to guarantee any negative credit attached to the debt gets removed upon settling the debt. When attempting to settle the debt, be persistent. If the person assisting isn't helpful, ask to speak to a manager.
Debt Settlement
Debt settlement companies work to settle debts on behalf of their clients. Do research before using a settlement company and only deal with reputable companies. The National Foundation for Credit Counseling provides helpful guidelines designed to steer people away from unscrupulous debt settlement companies. Companies asking for payment prior to providing results are suspect. Consumers should also be wary of companies making broad claims seeming too good to be true. Insist the company provide all conditions and guarantees in writing.
Debt Management
Debt settlement companies engage in debt management plans. The debtor pays a monthly sum to the debt settlement company. The company disburses the money to the various creditors. In some cases, the creditors agree to lowering the interest rates or to drop penalties and late fees. Any conditions and agreements need to be made in writing.
IRS
An area to consider when settling debt is the Internal Revenue Service. When settling debts for less than their full amount, the difference is considered income. For example, someone takes out a loan for $50,000 and only pays back $20,000, the IRS considers the difference of $30,000 as income. Filing for bankruptcy and some forms of debt settlement in mortgages are exceptions.
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