How to decide whether you should try debt settlement or debt negotiation.

After reading this you will know whether debt settlement is something you should consider to avoid filing bankruptcy.

Instructions

Difficulty: Moderate

Things You’ll Need:

• If your even contemplating filing bankruptcy
• If you have secured or unsecured debt.
• If you can afford your current monthly payments
• If paying off your debt or your current credit scores are more important, at this point in your life.

1. Decide what debt you can manage and what debts are out of control.
2. Separate your debts and plan an attack Split the "out of control debt" into "secured" and "unsecured" piles so to speak. If the unsecured debt is the majority of the problem, then keep reading. (Unsecured debt are commonly credit cards, medical bills, personal loans, some business loans, and other...)
3. What can you save? If you can save enough with consolidating your unsecured debt, to manage your secured debt on your own, then debt settlement would mostly likely provide a month-to-month-benefit and a long-term-benefit.

Tips & Warnings

• What is debt settlement or debt negotiation and who is it for ?
• Debt negotiation or more commonly referred as "debt settlement", is when a company takes over communications with your creditors for you. They negotiate a settlement with each creditor normally between 30-60% sometimes less or more. You make one monthly payment that is normally automatically drafted out of a checking or savings account. Those funds are then deposited into 3rd party "Special Purpose Account" in your name. As the money builds up in your settlement account or "Special Purpose Account", the company would reach a settlement with your creditor, pay them off and move on to the next creditor. To be done in normally 12 to 36 months. Debt settlement plans should not be over 36 months and 35 or 36 month programs is only with $60,000 or $100,000 or higher in unsecured debt.
• This program is only for the right people, in the right situation, with the right type of debt.
• If you are trying to avoid filing bankruptcy, and have high unsecured debt you may want to consider these types of services.
• But if you can afford your debt and either looking for a quick way out of debt or just to consolidate it into one monthly payment because it's easier and not because of a financial hardship, debt settlement is not for you.
• Pro's and Con's...
• In a "nut shell"... Pro's would be that they take over communications with your creditors, you can normally cut your monthly payments by 30-70%, you can cut your overall debt included by 40-60%, and become debt free in under 3 years.
• The con's would be that there will be a short term negative effect to your credit, debt settlement services can't stop a lawsuit against you, and if you have high liquid assets then there may be tax ramifications against you.
• But about the effect to your credit, if you are trying to avoid bankruptcy it's "the lessor of the two evils" so to speak. Debt settlement services only deal with debt they know they can settle, there is a very strict qualifying process to help you avoid lawsuits with creditors. And the government doesn't want anyone that can afford their debt and just doesn't want to pay it, to settle on their debt, so they will tax the "forgiven debt" if over $600.00 like it was income, if a person has assets comparable to the amount of debt they have. Other wise it would be an "insolvency exclusion" on your taxes, and you would not pay taxes on it.