What is Debt Settlement?
Debt settlement or debt negotiation assists borrowers in paying back less than the total amount owed on a particular debt such as a credit card or a medical debt. It is done without court intervention and is often a better option than bankruptcy for higher income earners or those with sufficient assets. A debt settlement payment is typically in the form of a lump sum but short-term payment plans are not uncommon. In exchange for a reduced payment, the remainder of the debt is satisfied and forgiven. There are various factors that impact the success of debt settlement negotiations including the age of the debt, the total amount of the debt, whether the debt is secured by real or personal property, and the funds available to the borrower to settle the debt.
Any borrower considering debt settlement should consult with a tax professional regarding the taxable consequences of forgiveness of indebtedness income. Unlike a bankruptcy proceeding which does not trigger debt forgiveness income, debt settlement can trigger the realization of taxable income to the borrower.
If you have outstanding debts and have the means to negotiate reduced payoff amounts, we encourage you to call us today. Do not hire a non-attorney representative to advise you on debt relief or negotiate your legal obligations.