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Thread: Debt Settlement

  1. 09-06-2008, 01:31 PM #1
    JulieAnne
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    Default Debt Settlement

    I have accumulated around $40K in credit card debt and am finding it difficult to make my payments due to loss of income. I'm living paycheck to paycheck and have considered debt settlement. I have talked with a number of companies, but am reluctant to go that route. I have worked out hardship payments with my creditors, but I know the program will only go on for a limited time and then the payments/interest rates will increase. I do not want to file for bankruptcy. Has anyone ever used the debt settlement companies and what has your experience been?
    Thanks!
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  2. 09-06-2008, 04:57 PM #2
    Ceashels
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    I have heard Dave Ramsey speak cautiously (and that is an understatement) about some of the debt settlement companies as they tend to take your money and do nothing, letting payments go into default and rack up lots of fees and interests.
    The Free Spirit Saver who walks the path with Greebo.

    Onboard with a modified Dave Ramsey Plan
    Budget: "Every month! On paper, on purpose!"


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  3. 09-06-2008, 05:00 PM #3
    Greebo
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    Debt settlement companies are by and large rip offs who will trash your credit while doing nothing for you that you couldn't do for yourself. Besides - while the loss of income sucks, you also legitimately owe the debt. I think there are other avenues to consider, such as extra jobs to bring in extra income.

    More importantly, however, is getting your spending under control. You don't rack up 40k in credit card debt unless you're living way beyond your means (this is coming from an expert on that subject, trust me...)

    If you can put together your budget, your list of debts (balances, % and min payment, and your income and list your assets, we can help you formulate a plan at no fee, and hopefully w/o destroying your credit.
    If you could kick in the pants the person responsible for your problems, you wouldn't be able to sit for a month.

    Did you know that a 4 year student paying $20,000/year who finances their education graduates with over $103,000 in debt to start? But a student who works and pays cash and takes 6 years to graduate ends with $6,300 in their pocket! So much for "getting a head start by financing!"

    Greebo    (Nerd Spender): Loving and extremely patiently tolerated husband of ceashels.
     WARNING: Y Chromosome behind the keyboard. Adjust your listening filters appropriately!

    Three     Two mortgages, two one no car loans, one no credit cards, and a partridge in pear tree!
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  4. 09-06-2008, 07:25 PM #4
    Grandma Lewis
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    One of the things that debt settlement companies don't tell you is the tax consequences of settling the debt. If you settle a debt, you will receive a 1099-C for the amount that you did not have to pay. The amount of the 1099 is considered income and you will have to pay tax on that. For instance, say you owe 10,000 and you settle for 2,000. You will receive a 1099 for 8,000 and you will have to add 8,000 to your income for the year and pay tax on 8,000, just as if you had earned it.

    There are exceptions to having to pay tax for the amount of the 1099-C so you would want to research this thoroughly before you settle to ensure that you meet the guidelines.
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