Credit Counseling, Debt Management, Debt Settlement

THREE VERY BAD IDEAS

Credit Counseling/Debt Management

As the attached articles reflect, Credit Counseling, or Debt Management, is a very bad thing. Despite the promises in the advertisements, it

  • TYPICALLY DOES NOT PROVIDE THE PROMISED RESULT (I.E., IT DOES NOT WORK VERY WELL)
  • TYPICALLY SEVERELY HARMS YOUR CREDIT
  • IS A WAY FOR LENDERS TO MAKE MONEY THROUGH CONCEALED DEBT COLLECTION

Debt Settlement

Debt settlement is even worse. If you think about it logically, what lender would really give in quickly to a request to settle? If they give in quickly, then you really have no incentive to pay on time, and they fear that borrowers will tell friends and family, who in turn will also request settlements. So, the following is true

  • AN EXTENDED PERIOD BEFORE IT IS POSSIBLE
  • YOUR CREDIT WILL HAVE HIT A SEVERE LOW
  • SETTLING IS BAD ON CREDIT-YOU DID NOT PAY WHAT YOU WERE SUPPOSED TO PAY
  • WHEN THE LENDER WRITES OFF THE BALANCE, THEY REFLECT A "CHARGE OFF" ON YOUR CREDIT-YET ANOTHER HIT
  • ONCE WRITTEN OFF, THE LENDER WILL REPORT IT TO THE IRS AS A BAD DEBT-YOU RECEIVE A 1099-C AND OWE INCOME TAX ON WHAT YOU DID NOT PAY THE LENDER (SEE THE ATTACHED IRS WARNING ON THIS)