Debt settlement refers to a scenario whereby you end up paying less the amount than the actual amount you owe. This is usually done at a point whereby an individual is unable to pay the debt that he owns a creditor. It is beneficial to the debtor since it is a significant mark against the creditor score and other fees like taxes that a debtor is usually required to pay. This read looks at the do’s, and the don’ts of the business debt relief;
One of the dos of the debt settlements is that as a debtor, you should be proactive. You do not have to wait until your account is charged for you to act. Typically, the creditors will charge you when you have failed to pay your debt after six months. A charged-off account refers to the account that the owners have little chances of paying the debt.
If you need to contact the creditors, do it quickly, do not wait for them to contact you. The creditors may be willing to talk to you about dent settlements in the event your debt has not been already written off. When you contact the creditors, they will be able to formulate a debt management plan that may assist in salvaging your credit score.
One of the things that you should note is that whatever decision you make about debt settlement is that it will have some consequences. If for example, the amount of the debt settlement is more than $600 then you might be liable for taxation.
Secondly, you should also note that the debt settlement hurts your future ability to borrow money at given rates and your credit report. If you want to borrow money in future at a friendly interest rate, then pay your debt in good time. You should carefully think about this since the credit report will record how the settlement was made.
Another thing that you should note as far as debt settlement is concerned is that the creditors will ask for documentation to show that you indeed cannot settle the debt that you owe. This may require you to show proof of your income, the existing assets, and the debts that you have.
They may also need a copy of your current bank statement to determine indeed that you are unable to pay the amount. It is therefore essential to ask yourself whether you are ready to put all your financial cards on the table to the creditors or not. For more information on debt management, watch the video below;