Many Tennessee residents who are facing considerable debt know that the burden can significantly affect everyday life. As a result, it is not unusual for individuals to seek ways in which they may be able to address their debt in hopes of getting back on track financially. However, some parties looking to avoid bankruptcy may find themselves considering settlement options that may not be entirely helpful.
Companies that offer to reach debt settlements with creditors may seem like a saving grace, but really, they could be a wolf in disguise. Individuals may think that the company will work with creditors to reach a settlement that allows the debtors to pay an amount that is considerably less than their outstanding balances. However, these companies may also charge hefty fees and wait until enough money is accumulated before attempting to pay off any debt.
These actions could lead to individuals facing continued difficulties rather than gaining relief. Because parties are often told to send money to the settlement companies rather than their creditors, credit scores could be negatively affected due to it seeming as if the individuals did not make payments to creditors as agreed. Additionally, if a settlement is agreed to, individuals could still face negative repercussions as the IRS may consider the discharged debt as income.
Individuals looking to address their debt issues are already taking a step in the right direction. However, the paths they choose to follow could play a significant role in how well their situations turn out. Bankruptcy is a proven path that could help qualifying Tennessee residents handle their debts without facing the uncertainties of other settlement practices.
Source: macon.com, “Beware of companies offering to negotiate with your creditors to cut your debt“, Kelvin Collins, Aug. 16, 2016