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Debt settlement may not be the solution you hoped for

If you are struggling with overwhelming debt, your mind may be full of questions and worries about your future. Falling behind on your debt payments can be a scary thing, and you are probably dealing with warning letters in the mail and humiliating phone calls that demand payment.

During this stressful and confusing time, you may be looking for any port in a storm, and this is what makes many in Tennessee vulnerable to the lure of ads that promise to settle your debts quickly and inexpensively. If you are considering turning your debts over to a settlement company, you should take some time to investigate all your options and learn as much as you can about how the debt settlement industry works.

Is it worth the risk?

The first thing you should know is that the debt settlement industry is not closely regulated, so you may not have the law on your side if you deal with a company that uses unethical methods. In fact, in many cases, those who use debt settlement companies to resolve their financial problems end up in deeper trouble than before.

This is because the company will tell you to stop paying your creditors and instead send your money to a special account the company creates for you. When the company thinks you have enough money to negotiate with, it will contact your creditors and begin discussions for lowering your payments or balance. If the creditors agree, you may be fortunate. However, you are taking the following risks:

  • During the time when you deposit your payments into an account with the debt settlement company, the interest, fees, and penalties continue to build on your debts.
  • Many creditors refuse to deal with debt settlement companies.
  • Those creditors that do negotiate may not be willing to lower your balance as much as the company promises.
  • Any debt your creditors forgive may be taxed by the IRS.
  • The debt settlement company will charge you a percentage of your settled or eliminated debt as well as fees for the account you used to hold your payments.
  • At any step along the way, the process may break down, leaving you with unresolved delinquencies, lost fees and severely damaged credit.

As worried and confused as you may feel about your debt, the smartest thing you can do is to take time to think about your options and obtain information that will help you make a wise decision. A compassionate attorney can provide you with alternatives that will best suit your circumstances and get you started on the path to financial stability.

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