Avoid Debt – Advice on avoiding debt & bad credit issues
debt-settlement, Featured

5 Important points to remember during debt settlement

August 19, 2010 by · Leave a Comment 

The number of people having problem with credit card and other debts are increasing regularly. Debt collectors have to file hundreds and sometimes thousands of lawsuits every year to collect money when most of these debts could be collected without litigation. If you are a financially stressed debtor looking for settling your debts through a debt settlement company, then read on to know the 5 points that you should remember during the process.


1.Debt settlement affects your credit score: If you are keen on settling your debts through a debt settlement company, then consider the effect that it has on your credit score. Debt settlement affects your credit score in a significant way and therefore, this process is best considered when you have no other option but to file bankruptcy.

2.Savings through debt settlement can be taxable: Whatever amount you save through debt settlement will be subject to tax. If you owe $20,000 and you end up paying only 50% of the amount, then you save $10,000. This savings will be considered as an income and it will be subject to tax by the IRS. Thus you may feel that you can save a huge amount through debt settlement, but actually the savings become taxable. So, beware of the tax limits.

3.Know the new debt settlement laws: Be well informed about the recent debt settlement laws so that you are not cheated by the debt settlement companies. After the new debt settlement laws, the companies can no longer subject you to upfront fees. This new law goes into effect October 27, 2010. They can not even charge late fees due to no-payment to creditors. Take into account the new laws to safeguard yourself.

4.Check your credit report throughout the process: As you are making regular monthly payments to the debt settlement company, you are totally unaware whether or not the company is making timely payments to your creditors. To check this get your credit report and check if the payments are made on the credit report.

5.Write a debt settlement letter: If you are considering do-it-yourself debt settlement, then it is necessary for you to write a debt settlement letter to your creditor, mentioning the amount you offer to pay and the time required for you to pay.

Thus, before considering debt settlement, take into account the above mentioned points throughout the process.

Comments are closed.