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| Credit Answers > Settlement Information |
Settlement Information |
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Some issues you may wish to consider are as follows:
Creditors will continue to assess interest, late fees, over-limit charges, and any other fees associated with an account. As a result, at the time that a settlement is
reached, the consumer owes significantly more on their account thus reducing the actual savings.
Creditors are under no obligation to accept, or even entertain, a settlement offer. When this occurs, consumers have a higher balance because of the interest and
late fees that have accumulated on the debt. As a result, the consumer can end up in a far worse financial situation then when they entered the program.
Because they are no longer receiving monthly payments, creditors will likely engage in collection activities which may include repeated phone calls and other correspondence.
Over time, these activities can increase, especially as the consumer's account may get transferred to a collection agency.
Once a consumer stops paying on their accounts, the creditor may file a lawsuit against the consumer for breaking their contract. Most debt settlement companies cannot
offer any assistance when a lawsuit is filed, and as a result the consumer can end up with multiple judgments against them.
The consumer's credit reports will reflect the late charges and nonpayment of their unsecured debt. As a result, the consumer's credit score will drop while participating
in the program, and the consumer may experience the long term effects of a low credit score, which can include difficulty in buying a house or car, obtaining insurance,
or obtaining employment.
The debt forgiveness that occurs as part of the settlement may be taxable income.
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