I called a Company Genisis debt settlement the other day and the lady said that the amount they charge is 10% of the settled amount. This would be about $3,400 on my $34,000 debt and then they charge a $55 fee on top of that for 48 months ($2640) for a grand total of $6,040.
Wow….. and I think this also may hurt my credit. Credit counseling may take longer, 5 years but it may be better for my credit.
Managing debt can feel overwhelming, especially when monthly payments become difficult to handle. One option that many people consider is debt settlement. But what exactly is debt settlement, and how does it work? Let’s break it down.
What is Debt Settlement?
Debt settlement is a process where you negotiate with creditors to pay a reduced amount of your total outstanding balance. Instead of repaying the entire debt, you agree to pay a lump sum that is less than what you owe. Creditors accept this because they would rather recover a portion of the debt than risk getting nothing if you default.
How Debt Settlement Works
Evaluate Your Finances – Start by reviewing your income, expenses, and debts to see if settlement is a viable option.
Stop Regular Payments – In many cases, you may need to stop paying creditors directly and instead save money for a lump-sum settlement.
Negotiate with Creditors – This can be done on your own or through a professional debt settlement company. They reach out to your creditors to lower your total owed balance.
Make a Lump-Sum Payment – Once a deal is reached, you pay the agreed amount, and the rest of the debt is forgiven.
Get Written Confirmation – Always ensure you have written proof that your debt is settled, so it’s not reported incorrectly later.
Pros of Debt Settlement
You can reduce the total amount of debt you owe.
Faster relief compared to making minimum payments.
Helps avoid bankruptcy, which has longer-lasting consequences.
Cons of Debt Settlement
Credit score may drop temporarily due to missed payments.
Creditors are not required to agree to a settlement.
Possible fees if you use a debt settlement company.
Settled debt may be considered taxable income by the IRS.
Is Debt Settlement Right for You?
Debt settlement can be helpful if you are struggling with high unsecured debts like credit cards, medical bills, or personal loans. However, it may not be suitable if you can still afford monthly payments or if your debt is secured (like a mortgage or auto loan).
Final Thoughts
Debt settlement is a practical option for those facing financial hardship and looking for relief. While it comes with risks, it can help you regain control of your finances if done correctly. Before choosing this route, always compare alternatives like debt consolidation, credit counseling, or bankruptcy to find the best fit for your situation.
