When a person is in a lot of debt due to the abusive credit card use, they could choose to either file for bankruptcy or opt for debt settlement. In this article, the choice about debt settlement would be discussed so that readers could understand the different benefits and risk involved in making this choice.

Benefits of Debt Settlement

One of the major benefits of debt settlement is its ability to remove the debt so that the credit card holder could once again loan some money in the future if he or she really needs to. Unlike filing for bankruptcy, the credit score will decrease if debt settlement is chosen. Sometimes, when the credit score is too low, it would be very difficult to find a company who would be willing to lend some money.

Other benefits of debt settlement include saving money. Believe it or not, one can save money on settling their debts because some of the companies that loan the money may agree to settle for smaller amount so that their customer would be able to afford it. Sometimes, they could also agree to remove the interest as long as the original amount is paid as soon as possible.

Lastly credit card owners can now say goodbye to debt collectors who would do just about anything just to collect money that is owed. They might call or contact the credit card owners every day or even more than once in a day so that they could collect. This leads to the stress that is commonly felt by the people who owe lots of money.

Risk of Debt Settlement

Now that the benefits of debt settlement are clear, a closer look at the risks involved should also be observed. One of the risks involved is the damage of the credit because most of the credit card companies who receive less than what is due would file a report on the credit card as ?settled for less than owed?. Although this will cause much less damage than filing for bankruptcy, there is still a tendency that some credit card companies won?t lend you the money that is needed because of the history of the previous credit card. Sometimes, there are also other credit card companies who won?t add negative statements to the credit card if proper negotiation is made.

Although there are savings that could be made through the use of debt settlement, there are also taxes that need to be paid. The credit card company whom the debt is settled with will send a tax form and report it to the IRS. The credit card owner would then need to report their correct income so that there would be no penalties given to the credit card owner.

Negotiating your debt could be done by the credit card owner himself or through the use of a third party. Although some people prefer to find a third party because it lessen the stress that they feel whenever they need to come in contact with the different credit card company, there are still others who prefer to negotiate with the creditors on their own so that they could save money on the fee that needs to be paid to hire a third party.?

For more information about Benefits of Debt Negotiation, click here.