Hassle-s

Can't Qualify For A Loan?

Remove Negative Items and Raise Score

1-844-451-8696

Free Consultation | Privacy policy

The Dangers of Debt Settlements

A recent study shows that the average American is in debt for approximately $18,000. With so much debt, people are looking for a way out of paying these large amounts of money and as a result, they usually turn to debt settlements.

Debt settlement is a process by which a debtor and a lender negotiate a repayment amount on a loan or debt that is owed to the lender/creditor. This way, a person may end up returning less than what they actually owe.

This may sound like a dream come true; however, there are certain dangers of debt settlement. Four of the biggest dangers of debt settlement are mentioned below:

Damage to Credit Score

It is important to realize that debt settlement does not improve a person’s credit score. It can actually have an adverse affect on a person’s credit score and ruin it further. The reason for this is because debt settlement works to wipe out a person’s debt as quick as possible.

Outstanding Balances Grow

It is important to realize that if a person does not pay their debts on time, there will usually be an additional interest or late fees charged to a person’s account. Until these charges are settled, the creditors do not have to reduce the balance owing if they do not want to.

Lawsuits Can Emerge

You may not want to settle a debt for a certain amount. You may want the amount to be less than what is being said, however, a creditor is allowed by the law to sue a person to collect the debts that are owed to them. If a creditor decides to sue, the only option left is debt consolidation, that too at a quick pace and a price above what you may be willing to pay.

Effect on Income Taxes

It is important to realize that debt settlement can have an effect on a person’s income taxes. By law, if a forgiven debt surpasses $600, then the creditor is obligated to report this to the IRS for review.

According to the IRS, if a forgiven debt surpasses the amount mentioned above, it may be excluded from a person’s income tax. Of course conditions apply; however, this is a very common scenario that should be watched out for.

There are many more dangers of debt settlement. Before debt settlement, it is always wise to contact a tax professional so that they can provide one with the best advice and course of action possible.

Debt Widget

Get Started Today, Call to learn about debt solutions that make sense.
877-745-2385

Blue-Shadow-Left Blue-Shadow-Right

Latestpost

14
Jul

Factors That Can Help First-Time Borrowers Establish Credit

It is one thing to have bad credit in today’s wo ...

› read more

Magazine

Download our
FREE GUIDE

and get weekly money-savings tips!

Aweber