Quite a significant number of people find themselves in a situation where they’re faced with mounting debt and not nearly enough income to meet their monthly financial obligations. Obviously, those individuals faced with financial difficulties have no choice but to find the best solution to become debt-free, and put their money worries behind them. Many find their search leading to debt settlement, which has been growing in popularity in recent years.
Unfortunately, there happens to be a good deal of misinformation floating around, regarding the process of debt settlement, and if you’re considering this route it’s important to be well-informed. For instance, I recently read an article whose author claims that once you pay your agreed settlements in full you’ll have a “good credit rating. " The author should have gone on to explain that, yes; your credit score will improve, but only after your accounts are reflecting zero balances on your credit report. This process is not instantaneous, and can take several months. While I’m a supporter of debt settlement for individuals who are on the brink of bankruptcy, I also think it’s important to know the facts before you make your final decision regarding the best way to resolve your credit accounts.
I also recently came across some information that happens to be a complete fabrication. One author claims that debt settlement companies convince your creditors to “re-age" your accounts so that they appear current. This is simply not true, nor has it ever been true. Debt settlement companies simply negotiate with your creditors to settle your accounts for less than the full balance – usually 50% or less. There’s no need to re-age the account (nor will creditors agree to do so) during the process of debt settlement.
So that you can breathe a sigh of relief, it’s important to conduct sufficient research so you’ll be well-informed before jumping into a program with which you’re not familiar. There are several debt settlement companies that don’t require large up-front fees, or even require that you make monthly payments to a trust account. These same companies will work on a contingency basis, meaning you don’t pay for services rendered until a satisfactory agreement has been reached with your creditor. Beware of companies who seem to be more interested in collecting your money than legitimately helping you to resolve your finances and overcome your financial hardship.
Marie Megge is a consultant in the credit services industry. Over the past several years she has assisted many individuals in resolving their debt-related matters. For more information regarding credit and debt visit http://www.donaldsonwilliams.com
I’m sure you’ve heard the consequences relating to debt settlement, such as a possible tax liability, as well as a decreased credit score. Both of these are indeed possibilities, and you can learn more about income taxes as a result of debt settlement by clicking here . If you want to learn more about what affects debt settlement will have on your credit score, click here .