When Should You Use Debt Settlement As A Method Of Debt Relief

Debt settlement is something that I am not fond of

. But unfortunately, it may be the option that is your best choice for the situation you are in. How do you know when the time is right to settle your debts? This alternative is considered a last resort before bankruptcy. It should be used with care, because there are consequences for settling your debts.

Debt settlement is not credit friendly, but in some cases the damage is already done and settling the debt will not do a lot more harm. Also, you have to be aware that you will have to pay income tax on the amount of debt that is forgiven. Even with all this being said, there are times that this will be the best and least expensive way out of a bad situation.

If you have debt that has been charged off, this account is a good candidate for being settled. Many companies write debt off when there has not been a payment made in six months. If this debt has been on your credit record, many lenders will be willing to make a quick settlement for an amount less than is owed on the account. Give the lender a call and make them an offer for what you can pay to settle the account. If they accept the offer, get the terms in writing and make the payment using the method the lender advises. Get a receipt and a release of debt.

Another situation when debt settlement is an option is when you have a debt that is so large that you will most likely never have the money to pay it in full. If this debt is current, the lender is probably not going to be willing to make a settlement for 3 to 6 months. Stay in contact with this lender on a regular basis and keep telling them that you do not have the money to pay this debt and you would like to settle it. At some point in time, they will be willing to settle. They may go as far as suing you, but in most cases it is much easier for them to accept a settlement then to go through the inconvenience of dealing with the legal system.

Even though debt settlement is not pleasant, it does have its place and can give you debt relief. It is something you should do on your own and without a service. Services can be expensive and not all of them are reputable. If your debt is current and you feel you need help, a credit counseling agency can give you the help you are looking for.

by: Marjorie Salada

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