Debt Settlement in Tennessee

Life can be quite hard and frustrating with piling debts and repeated defaults on payments. With every collection call the situation gets even worse. Are you a Tennessee resident caught in a similar plight and cannot afford to pay off your debts entirely? Are you frantically looking for a way to avoid bankruptcy? Well, then a debt settlement program will be helpful for you.

Debt settlement the best solution to Tennessee debtors drowning in deep debt and helps them avoid the hazards of bankruptcy.

How debt settlement works in Tennessee

Debt settlement is a debt reduction program where the creditor accepts a reduced amount from the debtor that is regarded as payment in full. It works the same way as in any other state.

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You can settle your debts by either of the following:

Contacting your creditors and negotiating with them to reach a settlement

OR

Hiring the services of a BBB accredited debt settlement company.

Steps to negotiate with your creditors

  1. 1 Know the law: Learn about the debt settlement laws of your state.
  2. 2 Contact your creditor: Contact your creditor and let them know that you need to settle your debts.
  3. 3 Convince about your faltering finances: It is important to convince your creditors about your weak finances The creditor needs to be convinced that you are financially strapped and might soon end up filing for bankruptcy. Creditors are aware that bankruptcy might cause them to lose the entire amount you owe them.
  4. 4 Initiate negotiation: Negotiate with your creditors and do not agree on any amount more than 50% of your outstanding debts.
  5. 5 Offer a lump-sum as settlement amount: Whenever you set out to negotiate your debts with the creditors, try and offer a lump-sum as a settlement amount. Creditors are likely to accept your settlement proposal if they are sure you will pay them a large amount.
  6. 6 Propose a repayment plan: Propose a repayment plan if you are unable to pay the settlement amount at once. With a debt settlement plan you can pay off the settled sum in affordable installments.
  7. 7 Ask your creditor to report your debts as "settled": Once the settlement process is over, make sure your creditors report your debts to the Credit Bureau as "settled" or "paid" so your credit score will improve.

How do debt settlement companies help you to settle debts?

If you are not quite comfortable negotiating directly, then you can hire services of a BBB accredited debt settlement company to get your debts settled. Services offered by the settlement companies are tailored to suit your requirements and are carried out under the vigilance of competent debt settlement attorney.

Before you enroll with a debt settlement company, the firm will evaluate your financial situation and suggests a program suited to your needs. Once you enroll, the company will ask for a small upfront fee. The company lawyer sends legal letter to the creditors asking them to stop all communication with you and also informs them that the company will be dealing with your debt issues from now on.

Then, the debt arbitrator initiates debt negotiation with your creditors. Skilled professional debt arbitrators can negotiate and reduce your debts to 60% of your outstanding amount.

Once the settlement amount has been negotiated, the company creates a repayment plan to help you pay the settled amount. If you cannot pay the settled sum in a single payment, the payment plan makes room for affordable installments within your monthly budget.

Duration of the debt settlement process in Tennessee

Credit card debt settlements take about 3-9 months, while most other debts take about 1 to 3 years to get settled. However, the duration also depends upon various other factors, such as the number of debts you are settling, the total debt amount you are settling, etc.

How debt settlement affects credit score in Tennessee

The impact of debt settlement on your credit score is decided by:

  1. 1 The delinquency of your accounts.
  2. 2 Your current credit score.

If you settle your delinquent accounts, your credit report will show them as "paid off"/ "settled" and that will boost your credit score.

However, choosing debt settlement does not necessarily mean that you have a poor credit score. You can go for settlement even with a fair credit score. The key reason that causes debtor to opt for debt settlement is his/her inability to continue with the monthly payments towards the debts.

Therefore, debt settlement could be beneficial even if you do not have delinquent debts and your credit score is in a good shape. When you enroll for settlement of non-delinquent debts, your credit score may decrease if your accounts become deliquent. But that is just a temporary phase. On successful completion of the settlement, your score shoots up again. That puts you in a more favorable position than someone who has been lagging behind on his debt repayments.

Thus, debt settlement in general, makes way for a healthy credit report for you.

Advantages of Tennessee Debt Settlement

A debt settlement program helps you to:

Tax Consequences

Debt settlement is taxable. The IRS considers any forgiven amount to be taxable income.

On the completion of the settlement process, your creditor must report your forgiven amount to the IRS and send you a 1099C form so that you can report the income on your Federal tax return.

If your creditor does not send you the form, you must take the initiative and notify the IRS about the debt sum that was forgiven through debt settlement.


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