You can erase your debt through debt settlement, but is that the right option for you?[/caption] While it’s possible for you to use professional debt settlement company methods for your financial situation, you may find that knowing which method to apply is more complicated than you initially thought. For example, if you were to contact your credit card company to settle your debt with them, what would be your options? A payment plan wouldn’t be one of them; the credit card company will demand that you make a lump sum payment of the settlement amount and they typically won’t work with you unless you are able to pay that lump sum.
Debt settlement companies are able to work with your creditors as they are often willing to accept less than the original balance. For most people, debt settlement is the step before filing for bankruptcy protection. Debt settlement means your creditors are able to recover some of the money they’ve loaned to you, so working with a settlement company is in their favor. If you still feel that attempting to settle debts on your own is better for you, here is some debt settlement advice you should keep in mind when negotiating on your behalf.
If you still feel that attempting to settle debts on your own is better for you, here are some things you should keep in mind when negotiating on your behalf.
Debt settlement damages credit.
Debt settlements will be reflected on your credit report and thus your FICO score could decrease as a result unless you obtain a “paid in full” letter from your creditor. As you settle your accounts your credit score will reflect these changes. Credit repair may be offered by a debt settlement company as the process can help remove negative remarks on your credit report.
You may be sued for the money you owe.
Whenever debts go unpaid there is always the possibility of a lawsuit brought on by creditors. When you enter into the debt settlement process, your accounts remain in default. By remaining in default, this means the creditor or its assignee can still file a lawsuit against you. Having a debt settlement company can help you be in a better position to successfully negotiate a settlement.
Certain debts may not be eligible for settlement.
The types of debts you have may have an impact on the success of a negotiation. Tax liens and domestic judgments remain unaffected and some individual creditors may have a very strong resistance when it comes to settling your debt (they might not want to at all). This is another area where using a professional, knowledgeable debt settlement company can be helpful.
There are tax consequences to debt settlement.
Another concern about debt settlement is that if you have partially cancelled debts outside of the bankruptcy system, you will need to report it as taxable income. The Internal Revenue Service (IRS) considers any amount of forgiven debt as taxable income. There is an exception: the IRS doesn’t require you to report forgiven debt if you were insolvent at the time the creditor forgave the debt. This means that you don’t have to report the forgiven debt if the amount of your debts were or are greater than your assets (how much money and property you own).
AmOne® can help you find a debt settlement company that meets your specific needs. AmOne is a leading financial solutions provider and our mission is to help you access the highest level of industry-leading debt solutions and to give you the support and advice you need to achieve your financial goals. AmOne’s Money Coaches are here to help you gain greater control over your money. We offer ways for you to get control of your finances, including debt consolidation loans and debt management plans. In a personal, free consultation with an AmOne representative, we utilize our proprietary system to provide you with the best available financial information available at any given time. To learn more information on specific AmOne debt settlement options, please contact us today.