Some Dos and Don’ts of Debt Settlement

Debt settlement is nothing, but settling the debts with your creditors for less than you actually owe them. As it may leave a dark impression on your credit score, debt settlement should be avoided. Debt management can be the solution for you, if you are neck deep into debts. As soon as you observe the signs of warning, you should definitely go for the credit counseling. Here are some essential dos and don’ts for you.

Dos

Display Your Financial Status: Before opting for a settlement, the creditors may ask you to display the documents of your assets, current debts and income. If you are not in a good financial condition to pay off your debts, you will have to show them the proof. If they are convinced about your worse condition, they can go for a settlement. Creditors will never want the individuals to not pay the debts just to save a few bucks or to crack a deal in a clever manner.

Ensure The Matter Is Entirely Settled: When you are paying off through your debt settlement, you must make sure that the pay off shows in your credit report clearly. If you fail to report your settlements with the credit bureau, your account may be shown as delinquent for an indefinite period. Whenever you are paying off the debts, it is the legal duty of the creditors to update the credit report. If this is not done, it may show the entire balance as due.

Don’ts:

Never Overlook Results: You should keep the final consequences in mind. If you are in doubts, you can read some debt settlement reviews to obtain a clear idea. If you are settling for an amount with the creditors, the settled portion becomes taxable in nature. It also possesses a negative effect in your credit report. The credit report contains the entire list of the account whether the amount is settled or not. The future creditors will therefore get to know that you had taken debts in the past, but could not pay them off.

Don’t Make Impossible Commitments: If you are going for settlements, select a level, which you can manage financially. Unrealistic plans should not be entertained by the creditors and you should only commit whatever is possible.

Don’t Wait: You should not wait till your account has been charged off. If your payments are generally six months behind, your account gets charged off. It reflects that the hope of getting repaid is very narrow. But the charged off account never means that you no longer owe the debts.

As soon as you enter into the debt settlement program, make sure your creditors stop calling you for the payments. Do not make false commitments as they can make a huge mark on your credit report and the future possibility of getting a loan becomes almost nil in nature.