Debt Settlement
Is the process whereby you and your creditor agree to settle an account for less than the balance owed. Debt settlement is not for everyone and not every creditor will participate.
Debt settlement is also known as debt arbitration or debt negotiation. Many people view debt settlement as a viable alternative to Bankruptcy. For the debtor, this makes obvious sense – they avoid the stigma and intrusive court-mandated controls of bankruptcy while still lowering, sometimes by more than 50%, their debt balances. Whereas for the creditor they regain much of the amount owed and not risk loosing the entire amount in a bankruptcy discharge.

How Does Debt Settlement Work
Essentially we contact your creditors and work out a debt settlement plan on your behalf. Under this program we only handle unsecured debts, including credit cards. Unfortunately we are not able to handle student loans, auto financing or mortgages. Also you make your payments directly to the creditor until the negotiated settlement amount is satisfied. We do not accept payments on behalf of your creditors. Our fees are fixed and usually paid at the start of our engagement.

Drawbacks To Debt Settlement
1. Your credit score (FICO score) will be lowered.
Your credit report will show evidence of the debt settlement arrangement you made with the creditor and this will have a negative impact on your credit score. However this bad mark only lasts for about two years.
2. Possibility of lawsuit
If you fail to pay (or under pay) the creditoron the negotiated settlement, you may be sued for the original balance.
3. Tax consequences
If the amount avoided due to a debt settlement plan is greater than $600, the creditor will provide you with a 1099-C tax form. The amount avoided will be treated as taxagble income under the IRS rules. (See IRS Publication Form 982)

Creditors Who Actively Resist Debt Settlement Plans
Discover Card

Contact us today for a free consultation of your debt settlement needs.