How Debt Settlement or Credit Card Negotiations works

Debt Settlement companies offer a settlement program wherein they negotiate with your creditors in order to settle the debt for less than what you owe.

The companies charge an upfront fee for their services.

Debts you can settle

Credit Card Debt Settlement is quite common. Other than unsecured credit cards, medical bills, gas/store cards, personal loans etc can also be settled. But tax debts, alimony, child support, mortgages, car loans and federally insured student loans are excluded from a settlement program.

How much to pay for settlement

Debt Settlement companies charge 25-35% of the debt balance that is forgiven under the program. The fees are based on:

• How much you owe in total
• Number of debt accounts you have
• How much you’ll save by settlement

How long it takes to settle debts

It usually takes 2-4 years to complete a credit card settlement program or settle personal loans, medical bills and other dues. The period of completion depends upon your total debt amount.

Creditors may not sue after settlement

Once you negotiate debt settlements with your creditors, they may not come after you for the balance. It is illegal in many states such as Arkansas, Texas, Georgia, Michigan, Washington etc. However, in other states such as Alabama, Delaware etc, the creditor retains his right to sue you under certain conditions.

You may owe taxes

Once you go for credit card settlement or settle other debts, creditors will forgive a percentage of what you owe. This forgiven debt, known as cancellation-of-debt (COD) income, is taxable as per IRS guidelines.

To sign up for Debt Settlement Click Here.