Picking up from where Settling Credit Card Debt: 6 Facts to Know (Pt. 1) left off, here, we will continue to discuss some important facts to know when you may be considering settling credit card debt.
More Important Facts about Settling Credit Card Debt
Fact 3 – Research any debt settlement company before signing anything.
When you are ready to move forward with settling credit card debt, make sure to do your due diligence on any debt settlement company you are considering retaining. This can be a crucial step to help you avoid being scammed, losing money and getting yourself buried under even more debt.
Some of the specific steps you can take as you research companies you are considering include (but are not limited to):
- Contacting the state Attorney General and/or local consumer protection agencies to see if there have been any formal complaints filed against a company
- Conducting an online search of the company name with the word “complaints” to see if there are any results about this
- Making sure that a company’s fees are no more than the industry standard (and no more than the law legally permits)
- Reading all of the info a company provides you with regarding the results, terms of service, fees, etc.
Fact 4 – Settling credit card debt can have some tax consequences.
In the event that you (and/or the company you’ve retained) are successful at settling credit card debt, then you may need to be prepared to pay taxes on the amount of the settled debt. This is because this savings (i.e., the money not paid on the credit card debt) can be considered to be taxable income by the IRS.
Here, however, it’s important to also note that, if you are “insolvent,” there may be options for getting around having to pay taxes on the settled credit card debt (insolvency refers to situations in which people owe far more in debt than they own in assets). If the tax consequences of settling credit card debt have you concerned, make sure to discuss the specifics of this issue with an experienced attorney so that you can determine what your best options are.
Don’t miss the upcoming conclusion to this blog series for some more important info about settling credit card debt.
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