Prevent Bankruptcy By Opting For Debt Settlement

by : Jay Moncliff

Debt settlement is a very practical approach towards effective debt management and also practical enough to avoid bankruptcy. However, there are several myths associated with debt settlement due to which many people fail to notice this alternative.

Myth1: Debt negotiation and debt consolidation are considered to be one and the same.

Fact: This is absolutely wrong. Dent consolidation combines all your debts into one sole amount to be paid at a lower rate of interest. However, this debt is recovered by some other form of security such as your house. As you pay at a lower interest rate, you make finish paying the entirely amount in a huge span of time, which actually means you are ending up paying far more than your actual debt. In contrast to this, debt settlement reduces the total amount payable by around 50% thus allowing you to pay off your debts within shorter period of time.

Myth2: My creditors will not work for sure with a debt settlement company.

Fact: Usually most creditors are willing to work with debt settling companies if you have any payments to be cleared off. However if any creditor claims not to work with debt settling company, he/she is only being mendacious because they want to impel you towards making the entire payment. They do this to elude the negotiation tactics and other laws that the debt settling companies may use for settling the debts.

Myth3: The debt settling company cannot give assurance that I will get a settlement, they will just take my money and leave me with the full amount to pay.

Fact: Nearly all debt settlement companies offer refund in case they are ineffectual in settling your debts. All you need to do before finalizing on a particular debt settlement company is to make sure that some type of provision is there if the company is unable to help you.

Myth4: My credit will be washed-up if I settle my debts.

Fact: Do remember that every dark cloud has a silver lining. Once the debt settlement plan is done with, you can then start rebuilding your credit. But incase you are unable to manage your finances efficiently in the limited budget after settlement and you again come under debts, your credit will be adversely affected then.

Myth5: I will have to pay taxes on all the forgiven money.

Fact: There are certain margins decided by the IRS beyond which your debt amount becomes taxable. If you cross the boundary then you ought to pay the taxes. To understand your situation properly, you should contact a tax professional.