How to Evaulate Debt Relief Programs

Because of the economy many people are experiencing situations where they are unable to pay their credit card debt. For this reason people are turning to debt relief programs in an effort to get some type of relief from their debt. There can be a number of pros as well as cons when you seek the services of a company of this sort. Make sure you know all of the facts about any company you are looking to do business with.

Services Offered

If you decide to do business with a debt relief program there are a number of services offered. First of all they can negotiate new repayment terms with your creditors which are manageable and affordable. Sometimes they can get your interest rate lowered and stop late charges from accruing on your account. A debt relief program can also negotiate settlements for your entire balance. A number of settlements can be as much as 50 to 70 percent of your total outstanding balances. They even have representatives that perform consumer credit counseling services.

Fees

You have to be aware of the many fees you can incur once you start doing business with a debt relief company. It is very difficult to pin point exactly what your fee will be until you have contact one of the representatives from the program and given them certain information. Some of the ways that fees are calculated is based on the amount of outstanding debt you have. You are charged a fee based on a percentage of your total debt. It is not uncommon to see a fee of 15 percent of your debt. Other companies charge monthly service fees and set up fees in addition to the number of creditors you bring into the program. Less than two percent of consumers who sign up for the program complete it. The fees you have to pay may have to be paid before any of your creditors get paid through the program.

Location

Debt settlement companies are not allowed to operate in 12 states which include Arizona, Georgia, Hawaii, Louisiana, Maine, Mississippi, New Jersey, New Mexico, New York, North Dakota, West Virginia, and Wyoming. If you reside in one of these states a debt settlement company can not work with you even if they are stationed in another state.

Taxable Income

When the amount of debt forgiven is more than $600 you may have to report it as taxable income when you file your taxes. There are some exceptions. According to the IRS if you are insolvent or your liabilities exceed your assets when your debt is settled you do not have to report the forgiven debt as taxable income. The other situation that would prohibit you from reporting settled debt as taxable income is the filing of a bankruptcy petition.

Source: http://www.smartmoney.com/spending/deals/debt-settlement-could-cost-more-than-you-think-21442/

Source: http://www.topconsumerreviews.com/debt-relief/