Sometimes creditors may be willing to accept less than the full amount owed in debt when it is paid in a lump sum. This can at first seem like an ideal option; however you should consider all the pros and cons before deciding whether debt settlement services are best for you.
The advantages of debt settlement services are more obvious. Debt settlement can save you a large percentage of your money in a way that relieves you of debt quickly and effectively. It is usually easy to come to an agreement with creditors as they would rather have you pay back something than nothing. Services can allow you to be debt free in a relatively short period of time and afterwards you can work to start rebuilding your credit record.
Large debt settlement companies have relationships with collection agencies and can limit the chance of legal action when they see you are enrolled in a settlement program and are trying to satisfy the outstanding debt.
It is essential to discover if you really will be saving when taking tax implications are taken into consideration. If you are settling debt of more than $600, this is considered as income and will be reported on your IRS form. If you are already in the higher part of your tax bracket, using tax settlement services could push you into the next tax bracket. You must check with an accountant to see where you stand based on your financial situation.
Debt settlement does come at a cost. There are companies that charge after services are rendered and there are attorney based programs which can have up-front fee.s so you need to decide if you really afford to lose the full amount all at once. Some creditors may refuse to work with debt settlement services and companies need licensing to operate in some states.
Debt settlement services can be very good for some people but completely unsuitable for others. This all depends on your individual situation and how much you owe. It is important to consider the above to decide if debt settlement is a valid option for you.