Debt settlement is simply a negotiated settlement with the secured lender of a borrower. Commonly, lenders agree to settle for a reduced amount of the debt: usually around 50% of the original total, although favorable results can vary hugely. Once settlements are reached, the terms are signed in writing. The amount that can be legally settled differs greatly.
This process of debt settlement offers a number of benefits to the indebted individual. If your debts are actually current, but at a high rate of interest, you can qualify for debt relief. By entering into a debt settlement, you will pay less than you actually owe to the creditor. This makes future debt payments easier to manage and it can make your credit history less negative. By paying less than you owe, you will also avoid increasing the amount you are actually required to pay.
There are many debt settlement programs and legal professionals who will assist you in negotiating and settling your debts. If you decide to go this route, you will be responsible for paying lawyer fees, attorney fees, and other charges associated with this process. These fees can often add up significantly. If you choose not to use a debt-settlement company, you may end up owing more money overall, even after the negotiation and settlement process has been completed. It is often better to deal with these types of financial situations on your own.
Many people mistakenly think that debt settlement and filing taxes mean that they will be taxed on any forgiven debt. This is false. Debt settlement does not reduce taxable income, as some mistakenly believe. For most individuals filing their taxes, the IRS will still look at their gross income and take into account any forgiven debt. However, when an individual decides to use a debt settlement program, the forgiven debt is treated as income.
The benefits to using a professional company are many. You will have someone helping you every step of the way from beginning to end. You will not have to worry about dealing with creditors. You will have the peace of mind of knowing that you are going through a process that will ultimately help you reduce your credit card debt and eliminate it completely.
As you can see, there are many advantages and benefits to settling your debts on your own. You can often get rid of large amounts of debt without paying fees. You do not have to deal with your creditors. You will not be subject to the bankruptcy laws if you settle with a Phoenix debt relief company.