4 Mistakes You Should Not Make While Settling Debt

A man in debt is so far a slave. – Ralph Waldo Emerson

Debt settlement is perhaps the best way to pay back what is owed. The goal of debt settlement is obvious – to convince the creditor to accept a lower payment amount than the current balance on loan. However, getting there can be a challenging mistake and any mistake done in the procedure can make the settlement process risky.

Here are a few mistakes you must avoid during debt settlement in Texas.

1
Have unrealistic expectation

You may have heard that debt can be settled for pennies on the dollar. It is idealistic, but you should not expect to go in the same way. You may be able to negotiate down your debt, but it is important to consider that lenders are typically accountable to shareholders.

2
Tax consequences

Individuals undergoing debt settlement process often overlook tax consequences. A debt can be forgiven or settled anytime, but the IRS treats the forgiven amount as taxable income. The creditor will most like to issue you a 1099-C. Keep this in mind to avoid any surprised on the Tax Day.

In addition, the amount of tax you won on settlement amount depends on other assets a debtor has.

3
Too early negotiation

Though a counter-intuitive step, the more you express your inability to pay your lender back, the more they will be to negotiate. Missed payments and delayed delinquencies impact your credit a great. It is important to understand that majority of credit card companies may not be willing to negotiate until you are 90 days delinquent. Being premature in the process denotes that you don’t have full control on your financial condition.

If you are staring a too early negotiation, you should have a budget and know what is possible before negotiating.

4
Not seek help negotiating

You will most probably talk to a professional on the other end of the line at the credit card company when negotiating. Their skills may intimidate you as they are an expert at this task. So, seeking help from a debt settlement company is advisable who can negotiate to speak on your behalf. Professional organizations can help you negotiate better.

Navigating debt issues can be stressful and frustrating. Clients should know that whom to trust who can guide them to financial security. It is advisable to look for a trusted and skilled professional with reputable credentials.

Hope you don’t make these mistakes while settling a debt.

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