Has debt consolidation failed to resolve your debt problems? Is your financial crisis growing? Debt Settlement may be the answer you are looking for.
During Debt settlement you negotiate with your creditors in order to lower the amount you owe. It can be done by yourself or with a debt settlement company. The company provides a debt settlement attorney, who works on your behalf to reduce your debt burdens.
So, why would a creditor agree to a debt settlement agreement? Creditors agree because they know that if you are forced to file for bankruptcy they may end up getting less than they would by agreeing to a settlement.
In New York, the settlement procedure is same as in other states. If you choose to enroll with a settlement company, the company works on your behalf to negotiate deals that enable you to make the minimum number of payments to your creditors.
The duration of a debt settlement program depends on the total amount of debt, the type of debt, and the number of debts you owe. Typically debt settlement takes 1-3 years.
Debt settlement has a more negative effect on your credit score than debt consolidation does. However, these negative effects only last until you start paying on your settlement agreements. As you pay off your accounts and your debts start getting reported as "paid" and "settled" your credit score will improve.
The IRS considers any amount of your debt forgive in a debt settlement program as income to you. You and your creditors are required to report any amounts forgiven to the IRS and New York Department of Revenue. Unless you are insolvent on the day before your debts were forgiven, then you may end up with a reduced income tax refund for that year, or even owing additional taxes.
If you have any questions regarding the tax consequences of Debt Settlement, consult a licensed tax professional in New York.
Last Updated on: 08 Sep 2016