How Long Does It Usually Take For Debt Settlement Services

Once you decide that the best way to repair your financial situation is to use the services of a debt settlement company, there are details you may want to be aware of.

THE COST OF DEBT SETTLEMENT

Most legitimate debt settlement companies collect their fee out of what you pay to them to disburse payments to your creditors at your new negotiated amount. This amount is usually a percentage of the total amount of debt you owe and can range between 15 to 30 percent. There are those who will calculate their payment only on the amount of money they save you, which of course is a better situation if you can find it. At first the debt settlement company will collect your money and put it into a trust account in order to pay off your creditors at the lower principal amount they've negotiated for you.

There may be service fees they will take from this money at the beginning. In addition to the percentage paid to the debt settlement companies, you must also want to investigate any possible tax liabilities you might incur by accepting money forgiven from your principal. This amount can be counted as income and be taxed as such, unless you can prove that you were insolvent at the time of the settlement.

THE TIME IT TAKES TO PROCESS YOUR DEBT SETTLEMENT

Under normal circumstances credit card debt can take anywhere between three to nine months to settle with your creditors. There are instances where this time can either be reduced or increased depending upon needs and circumstances. There are instances where the time has been increased to between twelve and eighteen months and in some cases as long as four years. Lengthening the time of the process allows debtors to accumulate a larger amount of money in which to pay off their creditors.

In some cases years are needed for this to take place and avoid the only other alternative, bankruptcy. The unfortunate consequence of increasing the debt settlement time is that during that time interest continues to accrue on your debt. Even if your creditors settle for 50 percent of what they are owed, interest accruing over a year or longer can be quite substantial.

TALK TO A PROFESSIONAL

There are many ways one can improve their financial standing; before deciding on which program is best for your situation, study out all of the options available to you. Don't necessarily accept the services of the first debt settlement agency you find; verify its legitimacy first and ask lots of questions. Be sure you know before committing exactly what you will be expected to pay. You may want to speak to a financial specialist, trusted accountant or even an attorney before you make your final decision.

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