Posts Tagged ‘bills’
Debt settlement – How it helps you payoff credit card bills quickly
There are numerous debt pay off methods and amongst these, debt settlement is one such method that helps you to pay off your credit card debts quickly. Debt settlement is the debt payoff process that erases some parts of your debt. Thus, it becomes easier for you to go on making the payments on your credit cards and you may even be able to pay those off quickly.
What happens in debt settlement?
Debt settlement is one of the most popular debt pay off methods as it reduces the outstanding that you owe to your creditor or creditors. What happens in debt settlement is that it lowers the outstanding debt amount that you have and you are required to pay only the reduced debt amount. The creditor is not supposed to come after you for the forgiven part and is not supposed to hand it over to any collection agency after you successfully pay off the settled amount. Debt settlement generally lowers your outstanding debt amount by 40-60%. But, by how much your debt amount may be lowered will actually depend on your creditor.
In order to avoid any harassment regarding the settled account, it is really important for you to get a written agreement on the settled account or accounts. You should also check your credit report for the listing after making your payments on the settled accounts.
You can negotiate a debt settlement with your creditors and also with collection agencies if any of your accounts got handed over to a collection agency. However, you should know that not all creditors or collection agencies agree to a settlement. Moreover, you may have to miss payments on your accounts if you really want to settle your accounts with the creditors or the collection agencies. Otherwise, the creditor may not be ready to believe that you are in any kind of financial problem and may not agree to debt settlement.
Here comes in the drawback of a settlement. It hurts your credit. When you miss payments on your credit accounts, it gets listed on your credit report an lowers your credit score. So, if you think that you can actually manage to pay off debts without even settling your accounts.
Another disadvantage of debt settlement is that it has some tax implications. The amount that is forgiven through the settlement with your creditors is help to be your income. Thus, it is taxable. If the forgiven balance exceeds $600, you will have to pay tax on that amount to the IRS.
Debt settlement – How can it be done?
You can either settle your credit card bills on your own or if you think that it won’t be possible of you to settle the bills on your own, you can take the help of a debt settlement company.
If you want to settle your debts on your own, you will have to negotiate with your lenders on your own. You will have to ask for the written agreements and then go on making the on-time payments on your credit cards as per the lowered amount.
However, if you go to a debt settlement company, they will first analyze your financial obligations and your income. You will then be asked to open a dedicated account and save money. Only after you are able to save a certain amount, the company will negotiate with your creditors. You will have to forward the money to the settlement company and then they will forward the money to your creditors.
So, debt settlement does help you to pay off your debts quickly as the outstanding balance gets lowered and you are thus required make lowered payments.
Jason Holmes is a regular writer with Debt Consolidation Care and is also a contributory writer with other financial sites. His expertise is woven around various aspects of the debt industry and with his e-books he tries to impart to people the different situations and simple solutions to get out of difficult situations. Some of his works include e-books like ‘Credit Score The Quintessential Therapy for a Happy Pocket’, Take Creditors and Collection Agencies to Small Claims Court’ and, My Story- From Depression To a Smile’.
