Q: I have $45000 in debt, a "debt resolution" lawyer is telling me to enroll on their program. Their fee is $500 per month
I have $45000 in debt, a "debt resolution" lawyer is telling me to enroll on their program. Their fee is $500 per month for 36 months for a total of $18000. He said once the program is completed Ill be debt free. Im very skeptical of how would I be debt free if I am only paying their fees?
Is not even a settlement, because the money I pay them is only for their fees. They said that the debt is already written off to the IRS but the creditors still want to collect the debt for me, so by hiring them, they will look for any mistakes that the debt collector makes and when they find the mistakes they will make them remove the debt. So the creditors will not get paid or settled at all.
A: Once you accumulate a certain amount of money, they will negotiate with your creditors to accept that amount in full resolution of the debt. However, in the meantime, you will be in arrears (not paying), which will affect your credit. Obviously, the debt resolution company keeps a portion of that money. The one issue you should be aware of is that whatever amount is forgiven (in that negotiated settlement), is considered income by IRS and you will have to pay taxes on it. Through bankruptcy no taxes. You should speak to a bankruptcy attorney as well, it may provide a better option for you.
Timothy Denison agrees with this answer
A: Bankruptcy would almost certainly cost you a lot less, and be a lot quicker. Consult a bankruptcy lawyer about that option before entering into this arrangement.
Timothy Denison agrees with this answer
A: You are right to be skeptical. There is no certainty that your creditors will agree to settle your debts. A 'good settlement' now is typically 50 cents on the dollar, with many creditors requiring an even higher amount. You are only paying enough money to offer your creditors 40 cents on the dollar and that is not even factoring in the fees the attorney will take before making offers to your creditors. You will potentially owe income taxes on the debt that is written off by the creditor. You may settle with one of your creditors while your other creditors are starting lawsuits against you. If this happens, you will probably need to file a bankruptcy. You should speak with a bankruptcy attorney before you decide to work with the debt settlement company.
Timothy Denison agrees with this answer
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