Is there a way to legally eliminate debt? 

Recently, a client contacted us after hearing that our programs were not recognized by the courts. So, let's address this question:

Can you legally eliminate debt through a Debt Management or Debt Settlement Program?

And the simple, honest answer is YES !

Unsecured debts, such as:

• Credit card
• personal loan or line of credit
• bank loans
• cash advance loans
• medical bills
• repossessions

...are granted to the consumer under a contract or agreement. The consumer agrees to receive the credit (money/funds/item) with a promise to repay according to the contract.

What happens if the consumer cannot or does not repay the debt?

The creditor can attempt to collect through using various methods within the guidelines of the Fair Debt Collection Practice Act.  In most cases, a settlement offer of the account for less than orignially agreed upon, will be made.

When the settlement is completed, either paid in lump sum or in a series of payments, the account is deemed to have been either:

• Paid-as-agreed or

• Settlement-as-agreed

Your credit report will report this debt to have been paid in the same way with a ZERO balance. 

The "court" does not consider a supplemental payment plan or settlement agreement to be illegal as the creditor has the right to modify the original agreement!

If the debt forgiven is over $600, the the creditor may report it to the IRS and you would receive a 1099-C indicating that you may be responsible for additional taxes on the amount forgiven.

However, if at the time of the settlement (forgiveness) you were basically insolvent, meaning your debts (all debts: mortgage, car, student loans, credit cards, loans, etc.) were more than your assets (and in about 99% of the time they were), then you would not be required to pay any tax on the amount forgiven.

In fact you or your tax preparer can file intructions with IRS 4681 and then file a simple form IRS 982.

So, yes, you can legally become debt-free through debt management or debt settlement.

It may be in your best interest to seek professional help.

Credit Card Debt Negotiation

When faced with extreme financial hardship, making it almost impossible to pay the minimum payments due on your credit cards, you may want to try credit card debt negotiation. 

But before you jump in, you need to understand a few things:

1. Credit card companies, and especially collection agencies, DO NOT CARE about you or your financial circumstances! Don’t waste time trying to explain.  
2. If your account has not been charged off, you are probably not going to get a very good offer or any offer at all.  Creditors usually wait 120-180 days before giving up and charging off an account. 
3. Once the account has been charged off, it most likely will be assigned to a collection agency.  The agency will begin to call (incessantly) in order to get as much money from you as possible. 
4. Collection agencies can make agreements (within their client’s guidelines) to settle accounts for less than the full amount.   
5. But BE AWARE!  The collection agent has been trained to get as much money out of you as possible!  They will use all kinds of tactics (many that violate the FDCPA) in order to intimidate you. 
6. You may be told that they never settle for less than the full amount, but this is not true. 
7. They may say that they settlement agreement must be in a lump sum and usually by the end of the month.  This is not true.  Term settlements can be arranged. 
8. If you agree to a settlement, GET IT IN WRITING!  Do not be tricked into a verbal agreement. 
9. Keep records of payment.  If there are any discrepancies or disputes in the future, you must have proof.

Credit card debt settlement is not easy!  It takes many hours and precise follow up to successfully negotiate with your creditors, so you may want to consider seeking the help of a Debt Settlement agency.

Photo By SqueakyMarmot

Is Settling Credit Card Debt on Your own a Good Idea?

People call in asking about our Debt Settlement program every day.  Once we discuss the program and how it works we are often asked the question, " Why can't I just settle these debts on my own?" 

The bottom line is, you can settle your outstanding unsecured debts on your own.  All you need to do is call up your creditors, explain your hardship situation, and make them a settlement offer.  Sounds pretty easy, right?

It's not quite that simple.  You absolutely can settle your debts on your own, but you would be doing yourself and your wallet a disservice!  Debt Settlement programs offer you years of experience and expertise in dealing with your creditors and collections agencies, and most of the time they can get your debts settled for MUCH LESS than you can on your own. 

Why can Debt Settlement programs get you a better deal?

1. Years of practice: Good Debt Settlement negotiators have been settling debts for years on end.  This is what they do, and they have had a lot of time to hone their debt negotiating skills.
2. No emotional attachment: When you negotiate your own debt, you are emotionally attached to the situation. The debt collectors know this and will use it to their advantage. 
3. knowledge of the rules: Although Debt Settlement programs do not need to have any attorney on staff, they do have to have an understanding of the debt collection laws of each state.  They know what a creditor can and cannot do in a given situation, so the creditors cannot scare them into settling for more than they should.
4. Peace of mind:Collections agents can be extremely threatening and scary to deal with.  It is the Debt Settlement negotiators job to handle all communications with your creditors.  You have a highly qualified professional in your corner and that in itself is indispensable.  
5. Dedicated savings plan: Most people don't have thousands of dollars sitting around to use when negotiating with their creditors.  Debt Settlement programs put you on a dedicated savings plan to build the funds necessary to get your debts settled once and for all!

These are just a few of the reasons why settling your own debt could cost you in the long run. Using the resources of a Debt Settlement program will save you money and relieve the pressure of dealing with your creditors.  Although settling your debts on your own can work, Debt Settlement programs are most often the better choice.