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Debt Settlement in Maine

Debt settlement can be a great way to fix to your problem debt problems if consolidation has failed. With debt settlement programs in Maine you can get rid of your lump sum debt and avoid bankruptcy.

How Debt Settlement works in Maine

Debt settlement is a process where you negotiate with your creditors to reduce your debt amount so you end up paying only a percentage of what you originally owed. The process is also known as debt arbitration or debt negotiation.

In Maine, just like the other states, debt settlement can be settled in two ways. You can either negotiate with your creditors on your own or get help from a debt settlement company with BBB accreditation.

Settling debts on your own

Settling with your creditors personally is simple. You just need to get in touch with your creditors, convince them of your financial crisis, and work with them to settle your debts.

Few creditors want to settle for less than the full amount of the debt but they know that if you file for bankruptcy, they have a chance of not getting anything back. Therefore you have a good chance of getting a workable settlement.

The best and quickest way to settle your debts for as much of the debt amount as you can reasonably afford to pay in a lump sum. If this is not an option, then try proposing a repayment plan.

The most important thing to remember is to ensure that your creditor reports your debt as paid/settled to the credit bureaus after you have paid them off.

Debt Settlement with a settlement company

Debt settlement can difficult if you are not comfortable negotiating with your creditors on your own. A debt settlement company accredited by the BBB can prove all the negotiation skill and expertise you need.

After you enroll in a debt settlement program, the company appoints a debt settlement lawyer who works on your behalf by analyzing your situation and suggesting possible measures for debt relief. The lawyer then gets in touch with your creditors and starts negotiating. An experienced lawyer can reduce your debts by a considerable amount.

All you need to do is pay a fee to the company for their services and make monthly payments to them to pay your debts during the process.

Duration of debt settlement in Maine

The time it takes to settle your debts depends on the following factors:

  • Outstanding debt amount
  • Types of debts to be settled
  • Number of debts that you need to settle

In order to settle credit card debts it usually takes 3-9 months. For debts other than credit cards it can take about 1-3 years.

How debt settlement in Maine affects your credit score

Debt settlement does have an effect on your credit score. The impact varies depending upon several factors such as:

  • The number of creditors who report your debts as settled.
  • Late or missed payments mentioned on the settled account.

The effects of settling your debts are positive on your credit reports. The program does have an initial negative effect when you enroll for it but, once your debts are negotiated and settled with your creditors, the reports show them as "settled" which raises your credit score.

Not settling your debts is more disastrous than settling them. Being delinquent on your debts affects your credit score negatively and gives you a high debt-to-income ratio which can make it hard to get a loan when you need one. Settling your debts gives you the opportunity to fix both at once.

It is true that debt settlement provides an immediate decrease in your credit score when you enroll. But as you start making regular payments on your debts, your credit score improves.

How Maine debt settlement benefits you

The benefits of debt settlement are:

  • Debt settlement is faster than many other relief programs.
  • You only have to make minimum monthly payments.
  • Freedom from creditor harassment once you enroll with a settlement company.
  • The original debt amount is reduced.
  • Settlement leaves room for credit score improvement.
  • You save a considerable amount of money in the process.
  • Acts as the last resort before filing bankruptcy

Tax consequences of debt settlement

Unlike with debt consolidation, debt settlement has some important tax consequences. The IRS considers any amount of debt forgiven by your creditors as taxable income, unless you can show that you are insolvent. Your creditor is required by law to report the amount of the debt forgive to both State and Federal taxing authorities, and to send you a form called a 1099-C which you must report.

In order to find out what effect debt settlement will have on your state taxes you should consult a tax professional in Maine.

Other options

The type of debt program you choose depends greatly on your situation. What's right for one person may not be right for another. Therefore it is important that you examine your situation thoroughly and find the best way out.

If it seems too hard to get out of debt on your own, don't be afraid to get help from a debt settlement lawyer.

Analyze, discuss, and select the best plan you can find to get out of debt. It does not matter what you choose as long as you choose responsibly!

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