Is Debt Settlement a Good Option?
Debt settlement may seem like a practical solution to your debt, but it’s important to know what you’re getting into and explore all your options.
How Debt Settlement Works:
- You contact a debt settlement company and share your financial situation.
- You provide them with your debt information. The company will work out a lower monthly consolidated payment for you, which goes to them, not your creditors.
- Your monthly payments are placed into a savings account until the funds reach a sum deemed sufficient to start negotiating settlements with your creditors.
- If amounts are agreed upon, creditors will get paid. This process could take months or even years.
The Problems:
- Credit Impact: If you’re concerned about your credit, this process involves months or years of continual negative marks.
- No Guarantees: Creditors are not obligated to settle and may instead initiate court actions.
- Court Actions: Creditors may agree to small payments and still pursue court action.
- Tax Implications: Debt that is written off is taxable.
Our office has met hardworking families who hoped to pay their debts through debt settlement agencies. Unfortunately, these programs often did not work for them, leading them to seek bankruptcy relief after paying thousands to the debt settlement company.
Considerations:
- Explore All Options: People overwhelmed by debt need to explore all their options carefully. Consider what is best for you now and in the future.
- Be Realistic: It’s important to be realistic about your financial situation. Even if companies are willing to settle some of your debts, will you be able to pay the settled amounts?
Alternative Solutions:
If you’re considering debt settlement, it might be worth exploring bankruptcy as an alternative. Bankruptcy can provide a structured path to financial relief and a fresh start. Our Kansas City Bankruptcy Attorneys can help you understand your options and guide you through the process.
