This has been a difficult year for most of us. So, if you have found that your debt is growing beyond your control, you are probably considering options to help. If you are looking into debt negotiation as an option, there are several things that you should first consider.
How Does Debt Negotiation Work?
Debt negotiation can be handled on your own or with the aid of a company. Basically, you or the company works with your creditor(s) to settle the delinquent amount. The idea is that you will pay off the debt in a lump sum for less than what is owed. When using a company, they will negotiate the amount for you. However, what most debt settlement companies fail to tell you is that their services can also leave you in greater debt than when you started.
How Can it Fall Short
Promises Not Kept: Debt negotiation companies promise to save you money on debt repayment, but they often tack on hidden fees that add up quickly. In fact, you may end up in greater debt than when you started!
Lump Sums: Settled debts often need to be repaid in a lump sum. If you are unable to come up with the entire payment, you may not be able to settle the debt. Also, the interest & penalties on your debt will not stop accumulating during negotiations.
No Guarantees: Some creditors will not even work with a settlement or negotiation company. When using a debt negotiation company, you run the risk of receiving a lawsuit, judgment, wage garnishment, and/or bank levy.
Hidden Fees: Often the money you pay upfront for your debt repayment, goes straight towards the debt settlement company through fees. Instead of making progress towards reducing your debt, you may find yourself in more debt or in the same spot you started.
Credit Affected: The negotiation company may ask you to stop making payments, which could result in a delinquent account. Remember, delinquent accounts show on your credit report. This results in a lower score. You could also be sent to collections or be sued for the delinquent debt.
Additional Taxes: If a debt settlement is successful, the portion of the forgiven debt can be considered taxable income. So, you may need to pay taxes to the IRS on the forgiven debt.
Need More Information?
At the Law Office of Daniela Romero, we believe in relationships that are based on trust. Before we work together, we would like you to get to know us. This will allow you to be completely comfortable sharing intimate and difficult details of your case, so we can offer you representation to the fullest extent of the law. Call us today to set up a free consultation.