Getting into financial debts is like putting on weight. It is easy to get by leading a carefree life but is quite a difficult task to get rid of. Although losing weight can be a difficult task it is not impossible and neither is getting out of debt traps. You must have heard the old adage, where there is a will, there is a way and this is exactly what it takes to deal with financial debts and you will see yourself out of it sooner than you expect. Discipline, hard work, and right help are all that you need to get your finances back in control.
Credit card debts are a common problem for millions of Americans today. This problem is mostly faced by immature young individuals who go through major dilemma in reasoning their temptation of easy credit. However, it is not only young people who are facing this problem but there are other segments of the population as well who come across similar issues. There are many people, be it individuals who have suffered a job loss, injury or have spent more than they could afford, see their credit card bills growing every month. Most of these people can only afford to make the minimum payments required or in some cases, skip payments. This definitely leads towards growing credit card dues, which makes their situation even worse. And remember, the credit card industry makes a yearly turnover of multi-million dollars, which is made possible by your growing credit interests and minimum payments.
Well, the good news here is that there are ways to counter such financial issues. One of the most common ways to deal with the situation is to go for debt settlement. Let us take a quick look at what debt settlement is all about and how does it help in overcoming the credit card debts.
What is debt Settlement or credit card debt settlement?
Debt settlement is as old a concept as debt itself. It is a completely ethical, logical, and legal method to get you out of debts. This is a way in which you can avoid bankruptcy and come out of those debt traps laid by the credit card companies.
In case you have major credit card dues that you cannot afford to pay, then banking on credit card debt settlement is the best thing to do. Making only minimum payments do not do much to help your situation, rather you take decades to pay back all your debts and probably end paying ten times more than what you had borrowed initially. Debt relief can not only reduce your payments by 40-60% but also cut down your repayment time to 3 years or less.
So to conclude, if your credit card bills are keeping you up all night, and you just can not think of any way to get out of your debts, then considering credit card debt settlement may be a good option, this way you can not only save on the interest but also prevent yourself from filing for bankruptcy.
The Best Credit Card Debt Settlement
Debt Settlement Affect My Credit Score, is it true?
It seems as though individuals and families seeking some form of debt relief are seeing a significant amount of information regarding credit card debt settlement. Obviously, this form of debt relief (like all others) has some critics, which leads to at least a little skepticism amongst consumers who might be considering debt settlement.
One of the most common questions that are asked of debt settlement is whether or not it will have a negative impact on your credit score. The answer is yes, no and maybe. You see, each person's situation is different, so depending on your own personal financial status, credit card debt settlement may have a negative impact on your credit score.
If your bills are always paid on time each month, and your credit score is relatively high, I can say with a great deal of confidence that your credit score will be compromised by the time your accounts are settled. Most people who are paying their bills on time, but are seeking debt relief, do so because they tend to find themselves borrowing from one creditor to pay another in an effort to keep their finances afloat each month. Unfortunately, by doing this you're really not keeping your finances afloat; rather, you're getting yourself deeper in debt. Your credit score might appear to be okay, but overall your finances are lacking the type of stability that is needed to truly stay afloat. In situations like these, people notice that their credit score may fall below 700, sometimes dipping to as low as 500 during the delinquency period that is required to negotiate with creditors. After all of your accounts are settled, and reflecting zero balances, however, you'll see your credit score increase and reach a level which is considered to be high enough for credit approval on an auto loan or home mortgage within 9-12 months.
Those individuals whose accounts are already delinquent will likely not see their credit score negatively impacted due to debt settlement. Rather, those who fall into this category will find that their credit scores will increase significantly after all of their accounts are settled and reflecting zero balances. Let's face it - delinquency is what really impacts a credit score, so by remedying this delinquency, whether through full payoffs or reduced debt settlement payoffs, your credit score has nowhere to go but up.
In summary, depending on your personal financial situation, your credit score may be negatively affected by debt settlement, or this process can have a positive affect. Again, this all depends on your own financial situation. Debt settlement has helped many individuals, families and small businesses to avoid bankruptcy and/or years of paying high interest to various creditors.
Should you Avoid Debt Settlement Pitfalls?
If you're considering credit card debt settlement due to the fact that you're no longer able to meet your monthly financial obligations, you may be wondering what the pitfalls may be for this type of debt relief. Or perhaps you've heard some debt settlement horror stories, and you'd like to do your best to avoid these pitfalls so that you don't become a debt settlement horror story yourself. Below are some of the most common pitfalls of debt settlement that you'll want to know about prior to entering a debt settlement program:
* Debt settlement can potentially have a negative impact on your credit score. If you've been making your credit card payments by their respective due dates each month there's a good chance that your credit score is hovering at or above 700. In order to negotiate settlements with your creditors, unfortunately, your accounts must be delinquent, thus resulting in a negative entry on your credit report. These negative entries will result in a reduced credit score until your accounts are settled and reflecting zero balances, at which time your credit score will begin to increase. Many people considering debt settlement, however, have been unable to continuously make their monthly credit card payments, and have found that their credit score has already been affected. If this is the case for you, obviously your credit score has nowhere to go but up, and negotiated settlements will result in an increase in your credit score.
* Debt settlement may result in a tax liability. I'm sure you've heard about the potential for a tax liability as a result of debt settlement. You see, creditors are required by the IRS to report forgiven debts greater than $600.00 on IRS Form 1099. This notifies the IRS that you have settled one or more of your accounts for less than the full balance, because the IRS views your canceled debt as taxable income and wants you to pay taxes on it. Fortunately, most individuals and families find that they aren't actually liable for taxes on their forgiven debt. Fortunately, the IRS has an "insolvency" rule, whereby if you're considered insolvent during the tax year that your debt was canceled (i.e. your liabilities exceed your assets), you will not face a tax liability as a result of debt settlement.
* Collection calls from your creditors may be received. If your credit card accounts are not delinquent you're not receiving calls from your creditors. If they are delinquent, however, you know what I'm talking about. Creditors reserve the right to take whatever actions are necessary to collect them money owed them, and contacting you via telephone calls is perfectly permissable and lawful. You do have certain rights, under the Fair Debt Collection Practices Act, to protect yourself against ruthless bill collectors. It's not uncommon to hear phrases such as "if you don't work with us now your account will go to the next level of collection," "I'm calling about a legal matter" and "your account is scheduled to be turned over to our legal department." Most often, these are no more than threats. While some accounts do obviously end up with an attorney, most do not.
In summary, are there pitfalls to debt settlement? Some - but the end result is a tremendous feeling of relief after your accounts have been paid off and you're living a debt-free lifestyle. You'll no longer experience sleepless nights or the necessity to juggle money around in an effort to pay your bills; you can start to enjoy life again after your accounts have been settled and you no longer have monthly bills which are beyond your ability to pay. If you're planning on hiring a debt settlement company to assist with your debt, I urge you to research your options very carefully so that you hire a company that is ethical, honest and has only your best interest in mind.
