Settling a debt might be an option if you are unable to pay the debt in full. It can help you eliminate daily calls from bill collectors and prevent your financial situation from getting any worse. Unfortunately, the offer to settle a debt might not be all it seems.
What should you do if a debt collector calls and offers a settlement for a debt?
Debt settlement can be a successful strategy for eliminating debt. It allows you to pay a portion of the total you owe and avoid legal action and further debt collection efforts.
Debt collectors sometimes allow debtors to make a debt settlement offer. Settling can benefit you and the bill collector, and it can save you thousands of dollars.
However, there are instances when debt settlement offers are a scam. If you’ve received an offer and it seems too good to be true, chances are it’s a scam. This is particularly true when you are contacted by a third-party settlement company looking to settle multiple accounts for you.
In some cases, an unsolicited offer to settle from a debt settlement agency might be their attempt to feel you out. They’ll try to determine how likely they are to get money from you, and they’re hoping an offer prompts you to act.
You might feel like an offer to settle is irresistible, especially if you’re offered the chance to settle debts for three quarters or half of the total you owe. Unfortunately, many of these offers from debt collectors are a type of bait-and-switch technique that rarely helps the consumer. And in many cases, it results in your situation worsening instead of improving.
Are Settlement Offers Legal?
The Federal Trade Commission oversees laws regarding debt settlement solicitations, many of which are illegal. Despite these laws, debt collectors continue to make offers and try to scam consumers.
In order for an offer to be legal, consumers must be provided with information about the negative implications of settling their debt. For instance, settling a debt for less than you owe means you need to pay taxes on the unpaid amount – it’s viewed by the IRS as income. Many consumers pay their settlement amount only to end up back in debt because they are unable to afford their tax payment.
There are also usually fees associated with debt settlement and any offer made to you must make these fees transparent. If someone contacts you about settling a debt and tells you the process is free or won’t tell you the final cost, you are likely being scammed.
For more information on the FTC’s laws governing debt settlement check out their website.
Debt Settlement Assistance is Available
If settling a debt seems to be the best option for you, you should contact an attorney for guidance. He or she can speak to the debt collection agency and arrange a legal, reasonable settlement. This ensures you will know the final cost of settling and have a firm grasp of the implications of settling the debt.
For more information or for assistance with debt collection settlements, or to discuss your other options, contact the law office of Frank J. LaPerch, PC at 845.942.5500.