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The Pros and Cons of Debt Settlement

Is debt settlement too good to be true?

If you’re drowning in debt, the many tools to become debt free may seem confusing and debt settlement enticing. Here’s everything you need to know about using debt settlement to become debt free.

What is debt settlement?

Debt settlement or debt relief is a means of paying a lender, usually with the offer of a large, lump-sum payment, up to 50% less than what you owe them. A third-party, either a debt settlement company, such as Debt.com, or an attorney typically negotiates the terms of your reduced balanced due on your behalf. Everything debt settlement with Howard Dvorkin of Debt.com on Queer Money®:

What you should know about debt settlement

 

  Howard Dvorkin is the Chairman of Debt.com and Founder of Consolidated Credit Counseling Services. With 27 years of experience in financial services, Howard is a highly-regarded expert in the realm of consumer debt and credit counseling, and he is the author of two books on personal finance, Power Up: Taking Charge of Your Financial Destiny and Credit Hell: How to Dig Out of Debt. On this episode of Queer Money, Howard joins us to discuss the advantages and disadvantages of debt settlement, explaining how it allows you to repay your debt for less but adversely impacts your credit score. He introduces us to debt management as an alternative, describing how this path reduces your interest rate—while keeping your credit intact. Listen in for insight on the tax consequences of debt settlement and learn how Debt.com can help you choose the best option for getting out of debt!    

Debt Settlement Topics Covered

The pros and cons of debt settlement

  • Huge savings (as much as 60%)
  • Sacrifice credit, may get sued

How debt settlement impacts your credit score

  • Must stop paying creditors for at least 3 months
  • Low credit score, high interest rates for 7 years

What differentiates debt settlement from debt management

  • Settlement = repay debt for less but destroy credit
  • Management = reduce interest rates, credit in tact

Who debt settlement is right for

  • Don’t care about credit score or being sued
  • Just interested in knocking out debt

The tax implications of debt settlement

  • Receive 1099-C from bank
  • Pay tax on amount walked away from

How Debt.com helps people with their debt

  • Analyze income and expenses to offer advice
  • Choose best path for addressing debt
  • Done in 2 to 5 years if commit to program

Resources for debt settlement:

For more help with debt, click these links:

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