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Article Series: Debt
Relief & Debt Consolidation
I Want To Get Rid
Of My Debt...NOW!
Debt
Settlement: Why It's NOT a Good Option
You
find yourself up to your elbows in debt, whether it is from
credit cards, student loans or overdue bills
in general and you look at your options, finding an advertisement
for debt settlement seems like a good idea, but is it? A lot
of people don't realize that these are not always the best
ideas when trying to rid you of debt. A lot of times it depends
on the individual situation. Taking the time to do research
in regards to this type of debt relief is up to you; this will
help you determine if this avenue is the best for your situation.
One of the biggest reasons it is not always advisable to take
the route of debt settlement is because it can negatively
affect your credit report. This is because this type of debt relief
will show up on the report and is allowed to stay there for
up to ten years. Some people say that with this on their report
effects them getting positive responses for credit during this
period of time, though it is not really advisable for you to
try to get more credit after just getting rid of it. Although
some people think that some credit companies will find it admirable
that you went this route instead of bankruptcy and therefore
your debt settlement will not affect your credit negatively.
In this situation, it is up to you to do the research and figure
out whether the effects on your credit report is really worth
going this route in the first place.
Another reason that may require you avoiding the debt settlement
route is if you are only one or two payments behind. In these
situations, you usually should be able to resolve a situation
like this by just being frugal. In fact debt settlement is
usually only for those who are several payments behind. A lot
of debt settlement companies will only take you on as a client
usually when you are at least $10,000 or more. Some other things
to take into consideration when looking into debt settlement
is the fact that you wages can be garnished when going this
route. This is because of the agreement that you may sign,
allowing this to happen if a payment is paid specifically as
outlined in the original agreement. Also the creditor may call
you more often to harass you for payments if you are to take
the debt settlement route. Many people can overlook this, but
you must be aware of this before deciding if you want to take
this route or not yourself.
A huge problem with debt settlement and one that many people
are not aware of is that the debtor may owe income tax on the
amount left over after the settlement. In the end this could
end up costing you even more money than you save. Or it could
cause you to have to spend whatever money you are now saving
by the paid off debt on the owed income tax, therefore nullifying
any savings you may have thought you have acquired. This usually
comes in the form of a 100-C tax form being sent by the creditor
at the end of the year. So be careful in deciding whether or
not you really want to go this route or not. One thing you
may want to look out for when it comes to debt settlement is
the fee that they may charge you for their service. These fees
can add up and be ridiculously high, if you are not careful
and don’t do your research ahead of time.
You should also know that even though you come up with a payment
plan, the creditor could still report you as “Not Paid As Agreed”
and therefore affect your credit report in the wrong way. This
unfortunately doesn't seem like a very good deal in the end.
One other thing you should consider before going into debt
settlement is the reason you are in this situation in the first
place. Look over your spending habits and if you are not disciplined
or responsible enough to change your spending habits, this
is not the best idea for you. If you are disciplined enough
to follow the payment plan specifically as stated in the agreement
than you could benefit from it. You should also know not to
make any credit inquiries or apply for any new credit within
in two years of a debt settlement. Other than this, it is up
to you in the end whether or not taking the route of debt settlement
will have more benefits or not.
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SolveYourProblem.com
: 2007
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