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What You Must Know Before Attepting Debt Negotiation
By Dave Robinson, Thu Dec 8th
Debt negotiation should be viewed as a last-resort measurebefore filing bankruptcy. A lender has little motivation toaccept a pay off for less than the full amount unless the debtoris already months behind on bills. Debt negotiation, alsosometimes called debt settlement or debt arbitration, is bestreserved for use when debt is seriously delinquent. If you'reconsidering debt negotiation, it's important to be informedabout all the options available to help you deal with your debt. Contact your creditors, negotiate payment arrangements, askpermission to skip a payment, or ask for a lower interest rate.These are simple measures you can take as a first step to manageyour debt. Try these options first before you attempt any othercourse of action. If you have a large amount of debt, a qualified creditcounseling service may be able to help you reduce payments andprevent further damage to your credit report. Although creditcounseling can provide consumers with valuable assistance, somefirms exist only to cheat their unknowing clients. Thesecompanies use their non-profit status to attract customers whoare then
scamed into paying large upfront fees. Those fees arethen sometimes funneled to for-profit companies. Recently, theFTC and IRS issued the following tips for choosing a creditcounseling organization.
* Pay very careful attention to the fees you are being charged,the nature of the services the agency offers, and the terms ofthe contract. * Check to make sure that your creditors arewilling to work with the agency the you plan to choose *Consider using agencies that offer actual counseling andeducation, instead of simply enrolling all clients in a debtmanagement program Another option for consumers overwhelmed by debt is toconsolidate debt by establishing a new loan (debt consolidationloan) with lower monthly payments. A debt consolidation loanhelps manage your debt because the loan is usually over a longerperiod of time and possibly at a lower interest rate than yourexisting debt. Consolidation should be used when debts aremostly current. While there are many options to help you cope with unmanageabledebt, sometimes debt negotiation may be the only appropriatecourse of action remaining. For example, debt negotiation wouldbe a good course of action if a long-forgotten debt is the onlybad entry on your credit report. However, keep in mind, you mayowe income tax on the debt owed. Any forgiven debts of $600 ormore are considered income to the consumer. If you do negotate adebt down, the creditor will send you and the IRS a Form 1099-Cat the end of the tax year. As a general safety precaution, anyone who plans on using athird party to handle their finances should remember to checkthem out with the Better Business Bureau and State AttorneyGeneral's Office of Consumer Protection. These agencies keeprecords of credit repair services that have mislead theircustomers about the impact the service would have on theircredit rating, the fees involved, and the possibility of legalaction from the creditors. About the author: If you would like to get more credit information you can visitour website which contains many credit resources. http://www.my-credit-report.info This article is copyright2005, but can be freely reprinted, as long as no changes aremade, including hyperlinks.
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