Can You Get Real Debt Relief

The other day I wrote about debt settlement companies. There was some questions about that. Perhaps, I wasn't clear enough. Therefore, I thought I would take this opportunity to clarify this topic.

It is true, that when you are have credit card debt, that you often feel like there is no way out. That is when you might seek credit card debt relief. However, you have to be careful. There are many of these companies that offer Debt Settlement, that are really nothing more then a ripoff. They will take your money and not pay the bills that they are suppose to take care of.

So what is debt settlement? Well, simply put, debt settlement is when you hire a 3rd party to help you dig out of the debt hole to pay off your unsecured debts, which will primarily be credit card consolidation. Here is how it works. You are so far in debt that, bill collectors are calling you every day. Sometimes, several times a day. In fact, they may be calling so much that they are harassing you. You have no way, paying all the money that you owe. So you turn to a Debt Relief Company, to act on your behalf. This company then puts you in in contact with a debt settlement company or in some cases Debt counselor. Who then makes contacts with each of your unsecured creditors to negotiate a lower payment and interest. This includes lowering your overall debt. This is called the Debt Negotiation. They then combine all the payments together, and you pay them one (1) lower payment to them, in which they in turn are suppose to pay each of your creditors.
The process will leave a bad mark on your credit, but if you are behind on your debts, then your credit is already pretty well shot. You will also have to cut up all your credit cards, as they will be canceled. In the end, if you found a legitimate debt Relief Company, you WILL have Debt Relief, and you will have transitioned to a cash only lifestyle.

A word of warning, when you settle with a company that writes off a large amount. That money is counted as income on your tax return. In other words, if they write off $2000, you have to pay taxes on that on that figure. So, before you are completely debt free, budget for that potential increase in taxes.


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