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Is a Debt Negotiation Program for You?
A debt settlement or debt negotiation program is an option
worth to consider if you're deep in debts. If you
don't know how to deal with your debts enrolling in such a
program is a better choice than filing for bankruptcy.
Many consumer financial services today offer debt settlement programs for people
fighting to recover from debt mis-management. These
settlement plans are a very convenient and result-oriented method for getting out
of debt in a short amount of time.
Is it right for you? Read on
to learn how a debt settlement program works as well as its risks.
How a Debt Negotiation Program Works
Enrolling in a debt settlement program is relatively easy.
Simply
contact a reputable debt settlement company you can find on the web. Either
offline or online advisors will advise you on how to fill out the debt
negotiation form. And the consultant or the site will also review the
debt settlement program and how it works.
After evaluating whether you are qualified for the debt negotiation
plan, the debt counselor will advise you the monthly funds you need
to accumulate to meet the debt settlement payments. Depending on your financial situation the advisor may
also suggest you to
set aside a lump sum funds to put towards settlements.
Once you start accumulating the settlement funds, the consultant will
notify your creditors on your behalf. From then on, the debt settlement
firm will handle creditors' calls and will negotiate installment
settlements for you. This way you will only have to work through that
single representative, rather than through all of those creditors.
The Risks of a Debt Negotiation Program
Even though a debt negotiation plan offers a better debt solution
than filing a bankruptcy, it has some risks you need to take into
account. Here is list of its major disadvantages.
- The money you pay to the debt settlement firm is deposited in an
account and is held until there is enough to negotiate debt settlements
with creditors. This means that interest and late fees will be accrued
on your debts during the non-payment. And depending on the creditors'
policy, if there is no payment your bills will be sold to credit
collectors.
- During the negotiation period, the debt negotiation company will
advise you to send your payments to your account instead of to your
creditors. As a consequence your creditors will be reporting your
non-payment problem to the credit bureaus, which then will record these
items to lower your credit score.
- Once you stop paying your creditors, they will contact you
frequently. They will take every possible way -- such as filing a
lawsuit or garnishing wages -- to get their money back.
- The forgiven debts you get from debt negotiation are a taxable
income. The higher the amount the higher your tax bill will be at the
end of the year.
Considering the short term risks, it is essential that you get a comprehensive advice
from a reputable debt settlement company before enrolling in any debt
negotiation program.
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