Know Your Options Before Considering Debt Negotiation

Know Your Options Before Considering Debt Negotiation

by: Bruce

Hughbanks

Copyright © 2005, Bruce Hughbanks, Founder / Director / CEO -

The Employment Alternative Group™

Know Your Options Before Considering Debt Negotiation





Debt negotiation should be considered a last-resort measure before bankruptcy.

A lender has little motivation to accept a pay off for less than the full amount

unless the debtor is already months behind on bills. Debt negotiation, also

sometimes called debt settlement or debt arbitration, is best reserved for use

when debt is seriously delinquent. If you're considering debt negotiation, it's

important to be informed about all the options available to help you deal with

your debt.





Contacting creditors on your own, negotiating payment arrangements, asking

permission to skip a payment, or asking for a lower interest rate are simple

measures you can take as a first step to manage your debt. Don't consider any

other course of action until you've tried these options.





If you have a substantial amount of debt, a qualified credit counseling service

may be able to help you reduce payments and prevent further damage to your

credit report. Although credit counseling can provide consumers with valuable

assistance, some firms exist only to cheat their vulnerable clients. These

companies use their non-profit status to attract customers who are then tricked

into paying large fees. Those fees are sometimes funneled to for-profit

companies. Recently, the FTC and IRS issued the following tips for choosing a

credit counseling organization.





* Pay careful attention to the fees an agency charges, the nature of the

services it offers, and the terms of the contract


* Make sure that creditors are willing to work with the agency the you plan to

choose


* Consider using agencies that offer actual counseling and education, instead of

simply enrolling all clients in a debt management program





Another option for consumers overwhelmed by debt is to consolidate debt by

establishing a new loan with lower monthly payments. A debt consolidation loan

helps manage your debt because the loan is usually over a longer period of time

and possibly at lower interest than your existing debt. Consolidation should be

used when debts are mostly current.





While there are many options to help a consumer cope with unmanageable debt,

sometimes debt negotiation may be the only appropriate course of action

remaining. For example, debt negotiation would be a good course of action if a

long-forgotten debt is the only blemish on your credit report. However, you may

owe income tax on the debt owed. Any forgiven debts of $600 or more are

considered income to the consumer. The creditor will send you and the IRS a

Form 1099-C at the end of the tax year.





As a general safety precaution, anyone who plans on using a third party to

handle their finances should remember to check them out with the Better Business

Bureau and State Attorney General's Office of Consumer Protection. These

agencies keep records of credit repair services that have mislead their

customers about the impact the service would have on their credit rating, the

fees involved, and the possibility of legal action from the creditors.

About The Author

Bruce

Hughbanks is Dedicated to the Success of Business Minded Entrepreneurs

World Wide. His In-Depth Views, Techniques and Dedication to helping

others is second to none. Contributed to the Advancement of  Internet

Marketing

Success, Copywriting and Joint Venture Affiliations. Find out how he can

help you:

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