If you are drowning in debt, and even consolidation and reduced interest rates don't appear helpful debt negotiation may be the right choice for you. Debt negotiation is when you negotiate with your creditors to reduce your outstanding balance...
California (OPENPRESS) June 1, 2012 - If you are drowning in debt, and even consolidation and reduced interest rates don't appear helpful debt negotiation may be the right choice for you. Debt negotiation is when you negotiate with your creditors to reduce your outstanding balance, and then you pay the reduced amount in full.
How do you know if you're a good candidate for debt negotiation? If you have not been able to make your payments for the past three months, you're suffering job loss or a medical emergency that keeps you from earning a paycheck, your creditors are threatening to sue you, a collection agency is harassing you, or bankruptcy seems like the only solution - if any of these apply to you, you are very likely a great candidate for a negotiation.
Debts that can be negotiated include medical bills, personal loans, store credit cards and bounced checks. You may be able to negotiate on student loans, depending on whether they are insured by the federal government.
When you negotiate your debt, you will likely have to go through debt counseling which, if you're in debt over your head, may be a good thing. In counseling, you will be guiding through the process of setting up a realistic budget you can actually stick to.
Once your creditors have determined an amount they are willing to settle for, you'll be notified and it is then your responsibility to pay the amount in full.
What are the benefits of debt negotiation? Obviously, the biggest benefit is that the total amount of your debt is reduced. It's also a quicker way to get out of debt. Creditors won't charge late payment dues or over-the-limit charges, in most cases, if you are involved in a negotiation.
A word of caution: Make sure you check your credit report to be sure that all of the creditors have reported the account status accurately on your credit report. Each account should be listed as "paid as agreed" or "settled." Anything else may have a negative effect on your credit report.
You should also remember that your settlement is considered by the IRS as taxable income. Make sure you check into this and that you report it on your taxes.
While it is true that your credit can be harmed and you may have to pay taxes on a debt settlement, debt negotiation is a quick way to get out of debt and get back on track. Just make sure you do it right.
