Debt Settlement Programs – How to Choose the Right One for You?
When you decide to work with a debt settlement company, you will be required to pay a monthly fee. Your payment to the debt settlement company will go toward negotiating with your creditors. However, once the deal is final, you will have the option of contesting the judgment in court. If you don’t like the result, you can opt to file for bankruptcy. This option is not suitable for everyone, so you should consider your options carefully.
If your account is over 180 days past due, the collection agency will most likely negotiate with you. In such a case, you should try communicating a monthly payment instead of a lump sum. Older debts are more likely to be uncollectible, so your percentage for a settlement will be greater. However, be careful because delinquent accounts can damage your credit. Therefore, if you have any doubts, seek legal advice.
Bank of America is one company that conducts debt settlements. In some cases, you may not need a debt settlement company to get a settlement. However, when you reach default status, Bank of America will negotiate with the debt collection company. If you have a debt management plan, you may want to consider this option. As a rule, bankruptcy can cause your credit to be ruined and you may be better off settling your debt on your own.
Before you negotiate with a collection agency, you should research the agency’s policies. Make sure your initial offer is low enough to make it possible to negotiate. After contacting the collection agency, you will need to document the settlement with a signed agreement letter. This agreement will give you the peace of mind that you’ll get the best possible deal for your debt. If you can afford to settle your debt on your own, you’ll be better off than you would have been if you hadn’t attempted to negotiate with the agency.
Once you have decided to settle your debt, you will need to consider the taxes you’ll be responsible for paying on the forgiveness. Since the IRS considers the forgiven debt as income, the difference between the two amounts is taxable income for you. This means that if you’ve settled for $8k, the difference is $7,000 that you will need to pay taxes on. Consult a tax professional before pursuing a debt settlement.
Depending on the type of debt you’re dealing with, you may have to pay a fee. The fees may vary, but debt settlement companies will usually charge a percentage of the money they save from the debtor. If you opt for this method, be sure to ask the settlement company how much they charge you, before making a final decision. So, it’s worth the cost. This option is an excellent choice for consumers who are experiencing financial hardship and can’t afford to pay the full balance.
Regardless of which option you choose, remember that your credit score may take a hit. Defaulted accounts will appear on your credit report for seven years. Debt settlement programs may not work for you if you have already entered a bankruptcy. After all, creditors will continue to contact you and demand payments. If your debt settlement company does not work, your credit score may decline. The amount of interest you owe may increase significantly. You may also be sued for halting payments to the creditors.
A debt settlement company’s fees can be as high as 25% of the total amount enrolled. The fee for negotiating a debt settlement can vary by state, but in general, debt settlement companies charge between 15 and 25 percent of the debt. Therefore, if you owe $10,000, a debt settlement firm could negotiate a lower amount for you. In this way, your creditors will get a small portion of their money while you’ll be able to rebuild your credit. It’s important to note that debt settlement is not a substitute for bankruptcy, but it can be a great option in some cases.
Once you hire a debt settlement company, be aware of their fees. Most debt settlement firms charge a percentage of the debt eliminated, so if you owe $6,000 in debt, a debt settlement firm will charge you a fee of $2,500. The fee is a percentage of your total debt, so if your debt is worth $15,000, you’ll only pay the firm that charged you $2,500. However, some companies charge fees of up to 50 percent of the amount of eliminated debt.