Do you have a massive amount of debt and do not know how to pay it off? Debt settlement may be a solution for you. Debt settlement is when your lender, such as your credit card company, removes some of your debt. The company erases what you owe them in exchange for a payment.
Debt settlement might be a good option if you have no way of paying back your debt. By settling your debt, you may be able to save you hundreds, even thousands of dollars.
A settlement is a one-time payment for less than the total amount that you owe. To agree on an amount for the payment, you can negotiate with your credit card company. They may agree to take less than you owe, so that they are not forced to accept a total loss if you do not pay anything.
If you are not paying your bills on time, your credit card or loan company may call you when you miss one or more payments. If you cannot pay your minimum monthly requirement, the lender may begin to worry that you cannot pay the rest of the balance. They will also report your late payments and nonpayment to the credit bureaus.
Alternatively, you may contact the lender about a debt settlement or payment plan. You can explain your situation and why you cannot pay your debt, for instance, if you:
· Lost your job.
· Have a major medical crisis.
· Have an emergency.
· Have a housing crisis.
The bad news is, debt settlement will hurt your credit score. All of the missed and late payments will be on your credit report. A settlement – or debt charge off– can hurt your credit for seven years. Debt settlement should be one of your last options. In some cases, filing for bankruptcy may be a better option.
Another factor to consider is: The IRS considers any forgiven debt as income. The government will tax you on the erased debt, which you must pay.
If settling your debt is the right path for you, you can hire a debt settlement company to negotiate on your behalf. However, they will charge you for the service. Fees may be a flat rate or a percentage.
Is hiring a debt settlement professional worth the fee?