Re: What now?

Posted by LadynRed (199.91.33.254) on September 16, 2002 at 16:04:23:

In Reply to: What now? posted by Too Stressed on September 16, 2002 at 15:49:24:

I've never been through it, but I can tell you what's BAD about debt settlement.. just about everything !

What these places do is charge you fees to bascially ruin your credit FOR you. You send them money to pay their fees, while they let your accounts go just about to charge-off status, and some might actually get charged-off. By the time you're almost to charge-off (180 days of non-payment), creditors themselves will start to offer YOU settlements of less than the full amount, so you COULD do this yourself rather than pay some place an exorbitant fee to do it for you.

The big GOTCHA in all this is that with settlements, you will most likely end up with a 1099-C, which is 'cancellation of debt income' which is reported to the IRS. You will then end up paying taxes on any amount over $600 PER CREDITOR that's cancelled.. most of the debt settlement places won't tell you about your exposure to IRS tax liability.

Your credit will end up totally trashed, and you'll pay for that 'service'. Try calling your creditors and see if they'll put you on their hardship programs, which they usually will offer once you get a few months behind. Some of them will drop interest rates and waive fees and lower your payments for a period of time.

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