Consumers with huge debt amounts are looking left and right for debt relief and they usually find that they only have two options: credit counseling or bankruptcy. However, there's a third one called a settlement.
Debt settlement involves negotiating a deal with creditors that will allow you to pay a lump sum of money that is less than the amount you owe. The benefit of this is the instant financial relief it provides, making monthly debt payments manageable. However, there's a downside. The IRS could perceive the write-off as an income which means you'll have to pay additional state taxes.
There are two types of companies that can help you settle your debt: non-lawyer based debt settlement companies and law firms that provide a settlement service. They will require you to stop making payments to your creditors. Instead, you will deposit a specific amount of money on a monthly basis in a trust account which will build-up towards your lump-sum payment to your creditors. Using their services will prevent creditors from suing you for nonpayment.
There are a few things to look out for when choosing a debt settlement company. Make sure to check out their background with the Better Business Bureau and see if they received any complaints from customers. They must also help you pay at least 40% of your debt, which includes fees and creditor payments. Companies that require you to pay small amounts of money over long periods of time will only get you deeper in debt. Longer payment plans means more interest rates and less money saved. A reputable settlement company will provide a plan of action that will guarantee you becoming debt free in 2 years or less.
Use caution when choosing a debt settlement company and enjoy your life debt free.
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