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Should You Use Debt Settlement Services to Help You Deal with Debt Issues?

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Debt Settlement

Debt settlement schemes exist to help people get out of debt. You might be entangled in a debt and have no idea where to run to. Debt settlement companies help you get the best deal from your creditors. Nevertheless, you must know whom you are transacting within your quest to be debt free. Do not fall prey to unscrupulous settlement schemes.

Be keen

Avoid any company that promises to settle your debt at unreasonably low fees. Some companies come with overly sweet deals just to trap you. The following points should enlighten you about a possible fraud. Avoid the settlement company if it:

  • Agrees to settle all your unsecured debt at extremely low fees
  • Promises to stop lawsuits and calls from debt collectors
  • Tries to cut your communication to the creditor
  • Gives a 100% guarantee to offset your debt
  • Demands for some payment before the process commences
  • Suggests new government schemes to clear personal debts from your credit cards

What’s more?

Alternative settlement companies are non-profit. This consumer credit counseling service operates from government funds. Together with your creditors, they come up with a better plan to manage your debt. This is normally an affordable plan. They help you to develop a reasonable budget apart from financial counseling.

Another option would be to consider bankruptcy attorneys. They present all options in the law. Remember some attorneys will not charge consultation fees depending on your situation.

Tax Consequences

Did you know of the consequences that come with debt forgiveness? You should take any portion of a forgiven debt as a taxable income. Taxation bodies are likely to come your way demanding their dues. Consult a tax expert for further details on such an eventuality.

Take Care Not to Get Further Into Debt

Most settlement companies will advise clients’ to stop payment of their debts. This provides time to negotiate with creditors. Such a move negatively affects your credit score. Simply put, the moment you stop payments, you automatically become a defaulter. Creditors can even file a lawsuit against you. Upon defaulting on your credit card, late interest and fees add up to your debt the subsequent month. Exceeding credit limit accumulates additional charges and fees. All these increase your original debt.

What you should know

You should know that debt settlement is not a right. The government only encourages creditors to help you. Therefore, you can use debt settlement programs if you have total proof that you cannot pay up. The law requires that you avail each bit of the proof to your creditor. The settlement companies are under no obligation to agree or reject it. The government can only protect you from harassment.

Also, know creditors are always against such a move. Your financial capability determines the outcomes of your bid. Creditors may suggest other means to make it possible for you to pay. They may lower interest rates charged on your debt. However, they will fight to maintain the outstanding balance. They may even resort to extending your payment period. This means lower monthly payments for you.

Debts can sometimes be unbearable. When in debt, seek sound advice on how to handle your situation and read national debt relief reviews. Debt settlement companies can help you out. However, you should take great caution so that things do not get out of hand. With the above eye openers, you can surely benefit immensely from debt settlement services. That is for sure.