Debt settlement can be a tricky game, as it can save the borrower money while simultaneously creating tax disadvantages with the IRS. Understand how debt settlement works with advice from a licensed financial planner in this free video on personal finance.
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My name is Bill Rae, I'm with HBW of Florida. I've been in the finance field for well over 20 years and today's question is a very serious one to me. We're going to talk about debt settlement. It's very popular today for a lot of folks to be telling you that you can walk away from your debt without any consequences whatsoever, that it's easy. There are even some out there that are telling you can legally walk away from your debt. My caution to you is this, do understand that whatever you do in the finance, there are consequences. Debt settlements simply means something such as this, suppose I owe you 1,000 dollars and I realize I can't afford to pay you money on that 1,000 dollars anymore. Or I've come up with a little extra money and instead of paying you on the two years we agreed, I want to pay you off early. So I would call you or get back in touch with you and say hey, instead of me paying the 1,000 that I owe you over the next two years, would you be willing to settle for 400, 500, 600 dollars today? If you're willing to do that and we agree and we sign paperwork, that's debt settlement. That's allowing me to pay off a debt less than what I originally said. Do keep in mind that there are consequences that you might not be thinking. One of my favorites to warn people about is your Uncle Sam does not like losing money and do understand if he thinks you got a break, he's going to want to get a break, he's going to want a piece so be careful. As in all things financial, understand what it is that you're signing. Understand the true cost, understand everything associated with that and some of the consequences down the road. So ask around, seek counsel from companies such as myself. Definitely know what is you're signing at all times. My name is Bill Rae, I'm with HBW of Florida and we're here helping you build wealth.