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gpsyeyes
She's my world!!!
Member since 8/06 1184 total posts
Name:
Karen
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debt settlement question
Hi - was wondering if anyone knew the real consequences of doing this - how does it affect your future credit??
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Posted 4/11/09 10:09 AM  |
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LoveyQ
Stalkers, get a life.
Member since 11/07 12820 total posts
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Re: debt settlement question
Are you referring to when the credit company offers you a lower payoff amount than you actually owe and settle your account?
If so, this definitely negatively affects your credit. I have two friends who did this right after college (they had many late payments, etc. and one person had almost all of her creditors offer her settlement amounts and the other I think had one or two).
From what they told me, it stayed on their credit for 7 years, but one of them was able to purchase an apt. about 5 years later.
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| Posted 4/11/09 12:12 PM |
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EmmaNick
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Member since 12/06 16001 total posts
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Re: debt settlement question
In case you weren't aware, you will receive a 1099 on the forgiven debt and you have to pay taxes on that.
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| Posted 4/11/09 5:29 PM |
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LIMOMx2
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Member since 5/05 24989 total posts
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Re: debt settlement question
Posted by EmmaNick
In case you weren't aware, you will receive a 1099 on the forgiven debt and you have to pay taxes on that.
Only if you choose to have your debt lowered.
If you go the route of just having your min payments lowered and your interest rates frozen, this actually will help your credit. FM for more details from what we did
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| Posted 4/11/09 6:00 PM |
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gpsyeyes
She's my world!!!
Member since 8/06 1184 total posts
Name:
Karen
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Re: debt settlement question
Yes, that's the one I'm talking about. I was trying to figure out the downside to this vs. bankruptsy. Neither is what we want to do, but since I'm out of work and we don't want to loose our home. I'm not looking to get rid of everything, just some.
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| Posted 4/11/09 6:30 PM |
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gpsyeyes
She's my world!!!
Member since 8/06 1184 total posts
Name:
Karen
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Re: debt settlement question
Posted by EmmaNick
In case you weren't aware, you will receive a 1099 on the forgiven debt and you have to pay taxes on that.
Thanks - I had read about that & it is something we have to consider, too. So much to really think about before we can choose the path that is best for us.
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| Posted 4/11/09 9:00 PM |
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Re: debt settlement question
Posted by gpsyeyes
Yes, that's the one I'm talking about. I was trying to figure out the downside to this vs. bankruptsy. Neither is what we want to do, but since I'm out of work and we don't want to loose our home. I'm not looking to get rid of everything, just some.
The best debt settlement offers will be for you to pay a fraction of your debt and have the accounts settled, but most creditors are not going to allow you a long time to come up with the settlement amount. If you have, say 25K in debt, maybe you can settle it for 5-7K if you negotiate well but they'll give you about 60-90 days to come up with the 5-7K. Also, you have to make sure that the contract to settle is clear that the company will not sell your debt and will report it as settled.
You will get a 1099 for the amount forgiven. You don't get a 1099 for debt discharged in bankruptcy, though.
If you are determined to pay off some debts, you can file Chapter 13 bankruptcy and at least have the protection of the court while in the payment plan. Those protections are usually better than any terms that a lender will voluntarily give to you after you have made it clear that you are having trouble paying.
Sorry to be a bit vague but so many things depend on your exact situation. Well, the 1099 is not dependent on other factors. I guess it's true that the things in life that are always certain are death and taxes.
Message edited 4/12/2009 1:58:54 AM.
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| Posted 4/12/09 1:57 AM |
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gpsyeyes
She's my world!!!
Member since 8/06 1184 total posts
Name:
Karen
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Re: debt settlement question
Posted by Kerie-is-so-very
The best debt settlement offers will be for you to pay a fraction of your debt and have the accounts settled, but most creditors are not going to allow you a long time to come up with the settlement amount. If you have, say 25K in debt, maybe you can settle it for 5-7K if you negotiate well but they'll give you about 60-90 days to come up with the 5-7K. Also, you have to make sure that the contract to settle is clear that the company will not sell your debt and will report it as settled.
We were considering using a service for this - do they work the same way?
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| Posted 4/12/09 8:06 AM |
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Re: debt settlement question
Posted by gpsyeyes
Posted by Kerie-is-so-very
The best debt settlement offers will be for you to pay a fraction of your debt and have the accounts settled, but most creditors are not going to allow you a long time to come up with the settlement amount. If you have, say 25K in debt, maybe you can settle it for 5-7K if you negotiate well but they'll give you about 60-90 days to come up with the 5-7K. Also, you have to make sure that the contract to settle is clear that the company will not sell your debt and will report it as settled.
We were considering using a service for this - do they work the same way?
They vary tremendously and they work in a few different ways. There are some set you up to make payments but they take so much off the top that you still have trouble getting the balances paid.
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| Posted 4/12/09 6:09 PM |
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gpsyeyes
She's my world!!!
Member since 8/06 1184 total posts
Name:
Karen
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Re: debt settlement question
Thanks for the info! The one we talked to would reduce the amounts owed and consolidate them (with their fee) into one payment to be paid in about 2 years.
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| Posted 4/13/09 9:13 AM |
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