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