It isn’t uncommon for Kentucky residents and others to fall behind on car payments, medical bills and other debts. Those who don’t believe that they can pay a debt balance in full may want to negotiate a settlement with a lender. If a balance has been sent to a debt collection firm, that firm may also be willing to take less than what a debtor originally owed. However, there are potential negative consequences of debt settlement. Exploring the pros and cons of debt settlement is important before making a decision.
There are many potential issues that debtors should consider before they decide to pursue debt forgiveness. For instance, it may have a significant impact on a person’s credit score for several months or years. Typically, accounts that are settled will listed as such on a credit report as opposed to paid in full. In addition, the IRS may require individuals to pay income tax on more than $600 in forgiven debt.
Those who are insolvent or who had their debts discharged through bankruptcy may owe the federal government nothing. As lenders are under no obligation to accept a debt settlement proposal, individuals may want to explore other options to become debt-free. These options may include a credit card balance transfer or applying for a debt consolidation loan. Using these tools may allow a person to obtain more time to pay down an outstanding balance while also paying a lower interest rate. However, they may also lead to someone paying off more than they originally owed. If you’re considering consolidation, speak with a debt consolidation lawyer to learn if it’s right for you.
A person who wants to learn about bankruptcy & debt relief may be able to do so by talking with a legal professional. An attorney may provide more details about filing for Chapter 7, 11 and Chapter 13 bankruptcy Kentucky. Legal counsel may be able to talk more about obtaining a debt settlement or negotiate a debt settlement on an individual’s behalf. If a debtor files for bankruptcy protection, an attorney may be willing to represent that person in court.