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Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I am currently working with a debt settlement company. I have

Resolved Question:

I am currently working with a debt settlement company. I have 10 more months paying them 604.00. Thats 6000.40 dollars. Should I keep working with the company or stop using them and use the money to help settle the debt myself.
Submitted: 8 years ago.
Category: Tax
Expert:  Merlo replied 8 years ago.
Hello scott,

Was the debt settlement company that you are working with able to reduce the actual amount of debt that you owe, or lower the interest rate you were paying?

Just what advantage to you have by working with them as opposed to handling this on your own?

Do you have any debt which was cancelled that may be subject to tax?

Customer: replied 8 years ago.
The company settled one account for less and yes it is subject to tax. I do not know if there is any advantage working with the company or handling it myself. I was able to settle one account on my own also
Expert:  Merlo replied 8 years ago.
Hello againCustomer

The main advantage to working with a debt settlement company, is that it typically saves you from having to personally deal with multiple creditors who may be hassling you to pay your account, which that in itself can be quite stressful. However, if that is not of concern to you, then many times you can actually do just as well or better in reaching your own settlements.

With the current state of our economy, there are literally thousands of more people who are now unemployed and either cannot pay their bills in full, or are even forced in to bankruptcy. Lenders are well aware of that situation, and rather than risk losing everything, most of them (especially credit card companies with unsecured debt) are willing to work with you in settling your debt. Rather than risk you filing for bankruptcy where they stand to get nothing at all or a very small amount, they would rather settle for another amount.

As I said earlier, the main issue is that it can be a hassle working with them, particularly if you have multiple lenders involved. But if you have the fortitude to do this, then in all likelihood you can get the same or better results on your own.

The one thing you do need to keep in mind is that any portion of your debts which are written off or cancelled then become subject to tax, the same as if it were income to you. So when you are trying to negotiate these debts, also try to factor in that cost, and use that as another bargaining tool with the lenders.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you scott, and please let me know if you have additional questions or concerns.

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