What Is A Debt Settlement?
There is always more than one way to get to the same result. For money problems you might consider calling your lenders and asking for a lower monthly payment, taking out a consolidation loan, calling a debt counselor, or filing for bankruptcy. Another popular method to resolving past due financial obligations is through debt settlement. There are programs that offer to undertake this effort on your behalf, but many of the companies that run these programs have been found to be of little assistance. You could opt to try and work out something on your own, but this leaves you with the burden of fielding numerous calls and engaging in lengthy negotiations. The best choice is to partner with a debt relief attorney with experience settling debt on behalf of others.
Debt settlement is similar to a legal proceeding, in that the party asking for relief must provide evidence to the lender that a settlement is the best option. Some things to keep in mind about your case include:
- Your credit will reflect the settlement, so be sure that this option is best for your budget and future plans. If you are underwater on most of your obligations, chances are your credit is already less than perfect. Also, it does not take near as long to repair credit as most people believe, so if a big purchase is in your future the likelihood your credit will be in good shape by the time you need a new loan is good.
- Act sooner rather than later, the earlier on in your financial struggle you reach out to your creditors, the higher the chance of receiving a favorable response to your settlement offer.
- Don’t be afraid to be honest about your finances with your lenders, if you are near the brink of bankruptcy and will go that route if settlement doesn’t work, make sure your creditors are aware of this fact. Many lenders will agree to take a smaller amount than the full balance due instead of having the entire debt eliminated through a bankruptcy.
For some types of debt, there are tax and other financial consequences for settling with the lender for less than what is due. For instance, if you agree to pay a lump sum of $20,000.00 less than you owe on your mortgage to avoid a foreclosure, you can expect to receive a 1099 for $20,000.00 from the lender. This “loan forgiveness” can be considered income for taxation purposes, so you want to be sure the agreement you make does not cause more harm than good. Call us today for a review of these, and other important issues.
If you have questions about settling debt, call our office for answers. Call a Plantation, Florida debt relief attorney today for more information.