The Dangers of Debt Settlement
There are a wide range of debt settlement companies out there, and they operate in different ways. Here is a typical scenario:
You enter into a debt settlement agreement and make monthly payments to the debt settlement company which they will hold in an escrow account. The claim is that, once you have built up a reasonable settlement amount in the account, the company will then reach out to your creditor to make a settlement offer.
The problem is that there is no guarantee your creditor will accept the offer. Meanwhile, you have been paying money to the debt settlement company while your debt problems continued to grow.
The difficulty is compounded if you have multiple accounts you are trying to settle. One creditor does not care what arrangement you have with another creditor. This is why debt consolidation services also fail in achieving true debt relief.
If you do settle and your debt is reduced, the IRS will consider the reduction as income and tax you on it. This can leave you with a significant tax bill at the end of the year. The debt discharged in bankruptcy is not taxed.
For experienced legal guidance in your debt relief matter, consult with one of our bankruptcy attorneys at your earliest convenience.
For a free initial consultation about filing for bankruptcy with Simon Resnik Hayes LLP, call 888.368.4099 or contact us online. Our offices are open weekdays from 7:00 a.m. to 7:00 p.m., and we serve clients in the Los Angeles area and San Fernando Valley through offices in Sherman Oaks and Los Angeles.
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We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.