WHAT YOUR DEBT SETTLEMENT COMPANY MAY
NOT TELL YOU
At every turn, it seems, is another advertisement
from a company offering to settle your credit card debts for pennies on the
dollar. If you are considering hiring a debt settlement company, here are some
things you need to know:
- Some of your credit card companies will likely
refuse to work with a debt settlement company and instead will immediately
refer your account to an attorney to begin a lawsuit against you.
- If you get sued by a creditor a debt settlement
company cannot represent you in court, prepare court documents for you, or
assist you with legal advice regarding the lawsuit.
- Debt settlement companies cannot stop creditors
and their debt collectors from calling you, writing you, or taking action
to collect the debt.
- If the credit card company accepts a settlement
for less than the full amount owed, they may send you and the IRS a Form
1099 for ‘forgiveness of indebtedness’ income. You may be liable for
income taxes on the amount forgiven.
- You may be able to obtain similar debt
settlement services for much less money and with much better service from
a local attorney.
- Debt settlement companies sell their services.
The salesperson you talk to when you dial the toll-free number is probably
not trained to offer you unbiased advice and counsel on the other options
that might be available for your debt, such as a debt management plan
through a credit counseling agency or filing for bankruptcy.
- Even settled debts will show as bad credit on
your credit report for at least seven years from the date you last made a
payment on the account.
It pays to shop around and compare your options.
Spend some time with a credit counseling agency and an attorney skilled in debt
resolution before you make a decision about how to resolve your debts.
Gary Armstrong is an attorney in
Dallas, Texas specializing in consumer credit matters. He is a member of the
National Association of Consumer Bankruptcy Attorneys and the National
Association of Consumer Advocates. www.ArmstrongAttorneys.com