I have a lot of debt. Credit cards and student loans. I here all these commercials saying you can reduce your debt to a fraction of what you owe. Is this just a lot of hype or is it for real? Do I have to file bankruptcy or meet some other kind of criteria to qualify for these services? If these companies that claim they can help you are for real, can you recommend one?
Are their some “good” debt settlement companies out there? Yes, there are some that operate as authentically as they can.
But I do have a basic bone to pick with the debt settlement industry and the folks that run to it as some sort of a magic solution. Debt settlement falls into that same old wise sage advice that there is no free lunch. The big stumbling blocks with debt settlement are:
- Your creditors may not settle your debt.
- Debt collectors will still call and contact you until you can reach an agreement with a creditor and pay it in full.
- Your creditors may sue you while you are attempting to settle your debt.
- Your credit will be shot.
- Depending on your financial status after you settle the debt you could owe the IRS a big tax bill.
Personally, I think you are much better off looking towards bankruptcy as a solution to repay your debts for a fraction. Here’s why:
- Once you go bankrupt collection calls must legally stop.
- Creditors can’t sue you.
- There is no tax for forgiven debt in bankruptcy.
- It is easy to rebuild your credit.
- You will have to repay nothing or only a part of what you owe and the amount is controlled by the court, not the creditor.
- This solution includes and is binding on all your creditors and not just those that want to play the debt settlement game.
Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.
P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.