Debt Settlement Works to Eliminate Credit Card Debt, But Can Ruin Your Credit Score in the Process
There is a lot of confusing information out there about debt settlement, how it works, does it work, taxes, and what it does to your credit score.
This is what debt settlement companies want to capitalize on and make you believe you cannot do it yourself without their professional help.
This is also what debt consolidation companies want you to believe and scare you about the risks and dangers of debt settlement and use their programs instead.
Debt settlement is not for everyone.
But you should at least know all the information before you make a decision on whether you choose to negotiate with your creditors or not.
When used properly, debt settlement works well.
I settled my credit card debts with Bank of America, Chase, and Citibank.
Total credit card debt settled was over $43,000.
Total settlement offers was just over $13,000.
Average settlement was around 30%.
I was not able to settle with Discover card due to a recent balance transfer but was able to obtain a financial hardship plan which drastically reduced the interest rate for five years.
You do not have to use a debt settlement company to do it for you.
You can do it yourself.
There are debt coaches out there who can help you through the process.
And they do not charge nowhere near the 15% a debt settlement company will charge you.
So what did I get out of my debt settlements? Other than eliminate over $43,000 in credit card debt by 70% in less than six months, I got a much lower credit score.
As a result of missing payments on my credit cards for six months my credit score dropped over 270 points.
I will also be sent a 1099-C tax form for the $30,000 in credit card debt that was canceled by the card companies.
However, since I am currently insolvent - I have more liabilities than assets - including student loans, and another tax bill - I should not owe anything for the $30,000 in canceled debt.
Make sure you consult a tax Atty.
before you follow this advice.
I am not a tax professional.
How long will it take me to fix my credit score? As long as I begin to pay all my bills on time and manage my credit wisely, my credit score should start to improve over the next 12 to 24 months.
Home mortgage loans should not have drastically increased over that time period so I should be able to qualify for a low rate mortgage loan at that time.
Compare that to a seven year time period for bankruptcy or a 3 to 4 year period for a debt consolidation program to finish.
Debt settlement can work for you and you can do it yourself but just be aware of all the consequences before you decide to do it.
And also be aware of the many benefits you can enjoy with zero credit card debt.
So to sum up, debt settlement works, you may not have to pay any taxes on the canceled debt, you can do it yourself debt negotiation, and you can rebuild your credit score faster than with bankruptcy or debt consolidation.
This is what debt settlement companies want to capitalize on and make you believe you cannot do it yourself without their professional help.
This is also what debt consolidation companies want you to believe and scare you about the risks and dangers of debt settlement and use their programs instead.
Debt settlement is not for everyone.
But you should at least know all the information before you make a decision on whether you choose to negotiate with your creditors or not.
When used properly, debt settlement works well.
I settled my credit card debts with Bank of America, Chase, and Citibank.
Total credit card debt settled was over $43,000.
Total settlement offers was just over $13,000.
Average settlement was around 30%.
I was not able to settle with Discover card due to a recent balance transfer but was able to obtain a financial hardship plan which drastically reduced the interest rate for five years.
You do not have to use a debt settlement company to do it for you.
You can do it yourself.
There are debt coaches out there who can help you through the process.
And they do not charge nowhere near the 15% a debt settlement company will charge you.
So what did I get out of my debt settlements? Other than eliminate over $43,000 in credit card debt by 70% in less than six months, I got a much lower credit score.
As a result of missing payments on my credit cards for six months my credit score dropped over 270 points.
I will also be sent a 1099-C tax form for the $30,000 in credit card debt that was canceled by the card companies.
However, since I am currently insolvent - I have more liabilities than assets - including student loans, and another tax bill - I should not owe anything for the $30,000 in canceled debt.
Make sure you consult a tax Atty.
before you follow this advice.
I am not a tax professional.
How long will it take me to fix my credit score? As long as I begin to pay all my bills on time and manage my credit wisely, my credit score should start to improve over the next 12 to 24 months.
Home mortgage loans should not have drastically increased over that time period so I should be able to qualify for a low rate mortgage loan at that time.
Compare that to a seven year time period for bankruptcy or a 3 to 4 year period for a debt consolidation program to finish.
Debt settlement can work for you and you can do it yourself but just be aware of all the consequences before you decide to do it.
And also be aware of the many benefits you can enjoy with zero credit card debt.
So to sum up, debt settlement works, you may not have to pay any taxes on the canceled debt, you can do it yourself debt negotiation, and you can rebuild your credit score faster than with bankruptcy or debt consolidation.