When credit card debt becomes overwhelming, too many individuals trust emails and ads that claim to help out by negotiating down the total balance of money owed-also known as debt settlement. As in most cases in life, if it sounds to good to be true, it probably is. Settlement companies collect a monthly payment from you while your credit card companies charge off your accounts, heavily damaging your credit history for years to come.
Though never guaranteed, let’s say you eventually reach a settlement to pay back 50% of the original balance owed to your creditor.
You will also owe up to 25% of the settlement to the debt negotiator. You may even remain legally responsible for the remaining balance, and you may receive a 1099-C form from the creditor informing you that you must pay taxes on the settlement amount.
Rather than destroying your credit history for the next 7 years or more, most independent, financial specialists would suggest that you first contact a reputable credit counselor, such as Debt Reduction Services.
Besides providing you with strategies for eliminating your debt, credit counselors will also help you address the root cause of your financial challenges: personal budgeting, spending controls and learning how to use credit wisely.
If you have any questions, would like to discuss your financial challenges, or are just looking for advice, please call us at your convenience. As always, we are here to help and look forward to hearing from you.