Credit card Debt Settlement companies can seem like a godsend to those of us who may be in serious credit card debt. It is not that uncommon for many household to have some form of credit card debt. 

As a matter, nearly half of the American populace is dealing with this form of debt. It has been estimated that around 47% of Americans are dealing with credit card debt. 

The sad thing about this is that this number is growing, with 23% of consumers adding to their credit card debt because of the “Cosh Cosh” (You know what I am talking about).

Many households have been forced to pay their rent with their credit cards, thus adding to their debt.

Millennials have been hit even more harshly because of this recent worldwide event.

Debt is piling up for millions of Americans and finding a reliable credit card debt settlement company can really help alleviate some of the stress for many Americans.

In this article, I want to outline eight things you need to know about credit card Debt Settlement Companies. There are some great companies out there that will help you with your debt.

But unfortunately, there are also many scammers out there.

Knowing what to look for in these companies will help you find the best one for your situation.

8 Things To Know About Credit Card Debt Settlement Companies

Usually, debt settlement refers to an agreement between the borrower and the creditor whereby there is a reduced payment from the borrower and considered full pay. 

Debt settlement is a reduction agreement that is reached between a borrower and a creditor. 

With that said, in this article, we shall be taking you through the eight things to know about credit card debt settlement companies.

Here are the eight key points to note about credit card debt settlement companies:

1 – Debt Settlements Require Patience and Tenacity

When working on any project, patience should be your top priority, and settling your debt is no different. 

Therefore, when settling your credit card debt, let patience and tenacity be your top priority. 

With consistency and patience, you will be able to clear your debt within no time.

In addition to that, you might consider increasing your monthly payment depending on the amount that will best work for you. 

By doing so, the number of months required to clear your debt will reduce significantly.

2 – This Is Not the Only Debt Relief Services Available

Well, working with a credit card debt settlement company isn’t the only service for dealing with debt. 

When it comes to settling debt, you might also consider negotiating directly with a credit card company. 

In addition to that, you might also consider working with a credit counselor or declare bankruptcy.

Instead of hiring a company to talk to the creditor on your behalf, you should always remember that you can achieve it for free on your own.

However, if you find it challenging to face your creditor, you can always contact a credit counselor. 

Consider working with a reputable credit counseling organization that will advise you on managing your debt and money. 

Usually, most credit counselors with an excellent reputation are non-profit organizations and will offer their services via an online platform, local offices, or a phone. 

Despite being a non-profit organization, you should note that it doesn’t mean the service offered is free.

When it comes to declaring bankruptcy, this action has significant consequences, such as lowering your credit score. However, according to most credit counselors, in some cases, it makes lots of sense.

3 – The IRS Can Tax Your Debt Settlement

When it comes to settling credit card debt, you should note that most canceled debts are taxable. 

This means that if you can have a settlement that tends to be relatively less than the total debt you owed, you will end up being taxed on a forgiven debt that is over $600.

Usually, the creditor will have to file a 1099-C form with IRS. This form will detail the amount of the settled debt. 

Since you will not be paying your debt in full, the IRS will treat the forgiven amount as an income, and you will have to pay taxes on the discounted amount.

4 – Your Credit Score Will Take a Dip

This is something most people tend to miss out on when clearing their debt. When settling your credit card debt, your credit score will reduce significantly. 

The main reason why settling your credit card debt reduces your credit score is that it tends to reduce the credit for the creditors. 

This is just the same as closing your older account. When the credit resources decrease, credit imperfection such as missing a payment or spending more than 30% of the credit utilization tends to be more visible.

Even though this can be frustrating, you need to rest assured that paying off your loan has a significant impact and remains a considerable win. 

Therefore, you should consider celebrating that achievement.

5 – Debt Settlement Companies Are Booming

Have you ever asked yourself why there is a rise in debt settlement companies in the country? 

This is because more and more consumers find themselves overwhelmed in debt and even declaring bankruptcy after prolonged financial hardship. 

This has led to a boom in debt settlement companies.

Most consumers turn to these companies for help as they seek to settle their credit card debt. 

In recent years, there has been a significant increase in the number of consumers, which has resulted in the growth of debt settlement companies to keep up with demand.

6 – You Can Negotiate a Debt Settlement by Yourself

Yes, you can always negotiate your way out of debt, and the best part is that it is free. 

Since you will not have to hire a debt settlement company, you will be able to save a good amount of money as you negotiate to settle a credit card debt.

However, you should note that negotiating a debt settlement all by yourself is never an easy task. 

A do-it-yourself debt settlement remains a great way of saving both time and money. 

When it comes to DIY debt settlement, you will be able to negotiate with your creditors directly to settle your debt for less.

7 – Your Creditors Are Not Required to Agree to a Settlement

Settling credit card debt often involves negotiations; you might consider hiring a debt settlement company or decide to do it on your own. However, you should note that your creditors are not required to agree to a settlement.

This means that you or your debt settlement company will not guarantee you will successfully settle for your credit card debt. 

Some creditors don’t negotiate with both individuals and debt settlement companies. 

8 – Professional Associations Help to Regulate the Debt Settlement Industry

Usually, debt settlement companies often claim that they can talk your creditors into settling your debt. 

However, these companies will tell you that the creditors will not settle your debt until you stop making payments. 

Furthermore, debt settlement companies tell the consumers to make payments to their company as they negotiate with creditors. 

During the process, debt settlement industries will not inform you of the risks associated with hiring the company.

However, you can always avoid all these problems and risks associated with hiring a debt settlement company by hiring a lawyer. 

A debt settlement attorney possesses excellent negotiating skills that they have developed over the years while in law school and practice and experience.

Final verdict 

By going through the points discussed in this article, you will come to realize that settling your credit card debt is never an easy task. However, by adhering to the tips discussed here, you will find the whole process much easier.

If you plan on working with a debt settlement company, you should consider looking for one with a good reputation. 

If not, you should consider working with a debt settlement attorney. As we conclude, we hope that you have found this article beneficial.

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