Debt settlement companies get your creditors to settle the debt for less than what is owed. If the creditor accepts the offer, then the debt appears to be settled. This negotiation process must take place with all of your creditors. During this negotiation process with your creditors, late fees and interest fees can be compiling.
The secret that debt settlement companies do not share with their clients is that the services that they offer can be done by any individual – for free! Debt settlement is an option if you already have or are able to save, a sizeable amount of money that you can offer as a lump-sum payment to a creditor in exchange for the remaining debt to be forgiven.
Here are some things that you should be aware of before choosing a debt settlement over a debt management plan:
- Large up-front, late or additional fees
- Forgiven debts are taxable income
- Withholding payments from creditors will adversely impact your credit score and could lead a creditor to seek judgement
- Little client support or guarantee of success
- Can take between two to three years for settlement
Our credit counselors can discuss whether this option is appropriate for you, as well as alert you to any potential pitfalls or dangers. If a debt settlement commercial has you thinking of it as an option, we strongly urge you to make a free appointment with one of our credit counselors before you sign with a settlement company.