Is there really a way to eliminate half of credit card debt if you have over 10,000 in unsecured debt?
I have listened upon a air wave about a module that, if we have over 10,000 in credit label debt, will cut your debt in half as partial of a Recovery Act. Wouldn’t something similar to which harm your attribute with a label issuer
There are 4 suggestions to question “Is there really a way to eliminate half of credit card debt if you have over 10,000 in unsecured debt?”
The answer to your question is: YES, there is a way to eliminate (more than) half of your credit card debt if you have over $10,000 in unsecured debt.. but it doesn’t have anything to do with The Recovery Act. That ad is most likely a marketing ploy by a debt settlement company. And yes, debt settlement will hurt your relationship with the card issuer, as well as your credit score, and debt settlement companies can’t guarantee those results. I would not do business with any debt settlement company, but not necessarily for the reasons that that most people will give you. Some will tell you that all the debt settlement companies are scams (many of them are, by the way – but there are legitimate companies as well). Others will tell you that you can do just as well negotiating the debt yourself. Still others will give you the ‘holier-than-thou’ answer of ‘stop spending money, get a 2nd or 3rd job, and put everything you make into paying down your debt’ – and they’ll say this without any knowledge of your individual circumstances. If you can manage to pay your debt as agreed, that it almost always the best option. But for some people, their current circumstances simply won’t permit that. And the fact that most credit card companies have recently raised interest rates to 20%, 30% or more (even on historically good paying customers) doesn’t help the situation. So settling debt is a perfectly legal and legitimate method of solving the problem without going the bankruptcy route – which will demolish your credit for years to come.
The reason I tell you that you should not choose a debt settlement company is because – even if you find a high-integrity, ethical company that is truly interested in helping you – there is a far superior alternative available: DEBT RESOLUTION. The concepts are similar, but Debt Resolution provides benefits that debt settlement simply cannot offer, and it does so at a better price, with guaranteed results. There is only room for a limited explanation here, but I’ll try to highlight some of the key (and extremely important) differences between debt settlement and debt resolution.
Basically, debt settlement companies operate by acting as a collection agency for the credit card company. They get involved before the creditor actually refers the account to an outside agency, collect a bundle of money from the borrower over time, take out some hefty fees, and offer the balance to the creditor in an effort to settle the account, hoping the creditor will accept 50 or 60 cents on the dollar. These debt settlement companies are just that – private companies offering a service. They do not and can not represent the borrower.
Debt resolution, on the other hand, is an attorney-managed process whereby an attorney can actually perform the negotiation with the creditor on the borrower’s behalf. This is a legal transaction that only an attorney can perform, and it means the attorney can request a settled mitigation on the borrower’s behalf. There are some critical advantages to this, which I’ll cover shortly.
Key differences between debt settlement and debt resolution:
PERFORMANCE GUARANTEE – Debt settlement companies cannot typically guarantee a settlement amount. Debt Resolution guarantees settlement at 45% of the original debt (which also includes the attorney fees). Also, with Debt Resolution, no additional fees will be requested if the debt increases after the agreement is signed. This is written right into the contract with the attorney, and is very important because once credit card payments get behind, huge fees and interest rate hikes may be applied to the account, and can significantly increase the amount of the debt. Debt settlement companies may take advantage of this by basing their fees on the account balance when the account is settled, not the original balance. And since some plans may take several years to complete, those balances (and the accompanying fees) can increase dramatically.
TAX CONSEQUENCES – Debt settlement companies generally won’t point this out to borrowers, but when a creditor agrees to a settlement, they will generally issue the borrower an IRS Form 1099 for the amount written off. As an example, if the borrower has $50,000 in unsecured debt, and the creditor agrees to accept 60%, or $30,000 to settle the account, they will send the borrower (and the IRS) a Form 1099 which shows that $20,000 write-off as income to the borrower. So even though the borrower didn’t receive any actual cash from the creditor, the borrower may still have to pay taxes on $20,000 of additional income that year. With the attorney-managed Debt Resolution program, the resolved amount is a legal agreement between 2 parties, and since no cash was provided to the borrower in the form of actual income from the creditor, THERE ARE NO TAX CONSEQUENCES.
CREDITOR HARASSMENT – Since debt settlement companies cannot represent the borrower, they cannot promise to s
There are tons of books at the bookstore that teach you how to negotiate with your creditors.
All this is free information. I can’t imagine these companies are making money from info that is in books. If people are paying for this service – they are dummies.
Go to your bookstore.
Look in the Credit / Debt Repair – finance section.
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It’s a scam. Here’s what they do. They charge you an upfront fee of a couple of thousand dollars. Then they try to extort a settlement from your creditor. If they succeed, fine. But here’s what they may not tell you.
1. They cannot guarantee success.
2. A debt settlement is 1/2 step below a bankruptcy. The only difference is there is no court involvement nor is the creditor required to accept the settlement offer.
3. Your credit profile will be significantly damaged. My guess is that your FICO will drop about 100-150 points. It is a major hit in any case.
4. You are required to report that portion of the debt as income and pay income taxes on it. Expect a 1099-C that will be given to you and the IRS. Example: $10,000 debt minus 50% of that debt = $5,000. Add the $2,000 fee plus 20% for taxes owed on the forgiven portion of the debt and you’ve only saved $2,000.
5. If you have sufficient income to pay the debt, you should pay the debt. You’ll come out much, much, much better than if you go with the debt settlement option.
The Economic Recovery Act does not address individual credit card debt. It’s just a marketing scheme.
Call the credit card companies & face the music. Many will work with you if you *can* pay them. You may not be able to pay minimum, and they may offer to close the card, add no more interest & lower min payment. The banks have lost a ton of money (not shifting blame, just stating a fact) so when someone actually wants to pay this debt in full, they’re likely to talk to you.
I did this with 2 accts way back in 03, long before the banks had issues!
The answer to your question is: YES, there is a way to eliminate (more than) half of your credit card debt if you have over $10,000 in unsecured debt.. but it doesn’t have anything to do with The Recovery Act. That ad is most likely a marketing ploy by a debt settlement company. And yes, debt settlement will hurt your relationship with the card issuer, as well as your credit score, and debt settlement companies can’t guarantee those results. I would not do business with any debt settlement company, but not necessarily for the reasons that that most people will give you. Some will tell you that all the debt settlement companies are scams (many of them are, by the way – but there are legitimate companies as well). Others will tell you that you can do just as well negotiating the debt yourself. Still others will give you the ‘holier-than-thou’ answer of ‘stop spending money, get a 2nd or 3rd job, and put everything you make into paying down your debt’ – and they’ll say this without any knowledge of your individual circumstances. If you can manage to pay your debt as agreed, that it almost always the best option. But for some people, their current circumstances simply won’t permit that. And the fact that most credit card companies have recently raised interest rates to 20%, 30% or more (even on historically good paying customers) doesn’t help the situation. So settling debt is a perfectly legal and legitimate method of solving the problem without going the bankruptcy route – which will demolish your credit for years to come.
The reason I tell you that you should not choose a debt settlement company is because – even if you find a high-integrity, ethical company that is truly interested in helping you – there is a far superior alternative available: DEBT RESOLUTION. The concepts are similar, but Debt Resolution provides benefits that debt settlement simply cannot offer, and it does so at a better price, with guaranteed results. There is only room for a limited explanation here, but I’ll try to highlight some of the key (and extremely important) differences between debt settlement and debt resolution.
Basically, debt settlement companies operate by acting as a collection agency for the credit card company. They get involved before the creditor actually refers the account to an outside agency, collect a bundle of money from the borrower over time, take out some hefty fees, and offer the balance to the creditor in an effort to settle the account, hoping the creditor will accept 50 or 60 cents on the dollar. These debt settlement companies are just that – private companies offering a service. They do not and can not represent the borrower.
Debt resolution, on the other hand, is an attorney-managed process whereby an attorney can actually perform the negotiation with the creditor on the borrower’s behalf. This is a legal transaction that only an attorney can perform, and it means the attorney can request a settled mitigation on the borrower’s behalf. There are some critical advantages to this, which I’ll cover shortly.
Key differences between debt settlement and debt resolution:
PERFORMANCE GUARANTEE – Debt settlement companies cannot typically guarantee a settlement amount. Debt Resolution guarantees settlement at 45% of the original debt (which also includes the attorney fees). Also, with Debt Resolution, no additional fees will be requested if the debt increases after the agreement is signed. This is written right into the contract with the attorney, and is very important because once credit card payments get behind, huge fees and interest rate hikes may be applied to the account, and can significantly increase the amount of the debt. Debt settlement companies may take advantage of this by basing their fees on the account balance when the account is settled, not the original balance. And since some plans may take several years to complete, those balances (and the accompanying fees) can increase dramatically.
TAX CONSEQUENCES – Debt settlement companies generally won’t point this out to borrowers, but when a creditor agrees to a settlement, they will generally issue the borrower an IRS Form 1099 for the amount written off. As an example, if the borrower has $50,000 in unsecured debt, and the creditor agrees to accept 60%, or $30,000 to settle the account, they will send the borrower (and the IRS) a Form 1099 which shows that $20,000 write-off as income to the borrower. So even though the borrower didn’t receive any actual cash from the creditor, the borrower may still have to pay taxes on $20,000 of additional income that year. With the attorney-managed Debt Resolution program, the resolved amount is a legal agreement between 2 parties, and since no cash was provided to the borrower in the form of actual income from the creditor, THERE ARE NO TAX CONSEQUENCES.
CREDITOR HARASSMENT – Since debt settlement companies cannot represent the borrower, they cannot promise to s
There are tons of books at the bookstore that teach you how to negotiate with your creditors.
All this is free information. I can’t imagine these companies are making money from info that is in books. If people are paying for this service – they are dummies.
Go to your bookstore.
Look in the Credit / Debt Repair – finance section.
/
It’s a scam. Here’s what they do. They charge you an upfront fee of a couple of thousand dollars. Then they try to extort a settlement from your creditor. If they succeed, fine. But here’s what they may not tell you.
1. They cannot guarantee success.
2. A debt settlement is 1/2 step below a bankruptcy. The only difference is there is no court involvement nor is the creditor required to accept the settlement offer.
3. Your credit profile will be significantly damaged. My guess is that your FICO will drop about 100-150 points. It is a major hit in any case.
4. You are required to report that portion of the debt as income and pay income taxes on it. Expect a 1099-C that will be given to you and the IRS. Example: $10,000 debt minus 50% of that debt = $5,000. Add the $2,000 fee plus 20% for taxes owed on the forgiven portion of the debt and you’ve only saved $2,000.
5. If you have sufficient income to pay the debt, you should pay the debt. You’ll come out much, much, much better than if you go with the debt settlement option.
The Economic Recovery Act does not address individual credit card debt. It’s just a marketing scheme.
Call the credit card companies & face the music. Many will work with you if you *can* pay them. You may not be able to pay minimum, and they may offer to close the card, add no more interest & lower min payment. The banks have lost a ton of money (not shifting blame, just stating a fact) so when someone actually wants to pay this debt in full, they’re likely to talk to you.
I did this with 2 accts way back in 03, long before the banks had issues!