Debt Settlement Laws

Debt resolution is a great way to shed large obligations that you may not be able to pay off by offering minimum payments, or if you find yourself swallowed up by debt. It is a wise idea to be mindful of debt negotiation laws so you can do all that is needed by the book, and not make matters more damaging than they may be now.

Is debt resolution legal?

Absolutely. Debt negotiation is not only legal, but a viable solution to getting rid of large obligations without filing for bankruptcy, or paying way too much in terms of finance charges.

A thumbnail rundown of debt resolution.

Debt negotiation is bargaining with with the people you owe money to to set up to pay back a smaller portion of your debt. This payment is usually made in one total payment, and varies between 20-80% of the original total depending on the resolution agreement you arrive at with the people you owe money to.

What are the IRS interests of debt negotiation?

Some creditors will send an IRS form 1099 claiming any funds saved in a resolution deal as income, and therefore taxable. However, you can fill out IRS form 982 stating insolvency at the time of negotiation. Insolvency essentially states that you had nothing, and you wouldn't be charged tax on the 1099 income. Discuss this with a tax attorney for details though.

Can funds be taken out of my bank accounts?

Not without a funds judgment. If you owe a creditor, collector, or anyone else any funds, they can get such a judgment and take money out of your accounts.

Another example of an cheating creditor or collector comes when you agree to a post dated withdrawal, then more than the agreed amount is withdrawn. Check with your bank and your state's banking authority for the specific rules and rights in the state in which you live.

Debt resolution is a absolutely legal way to reduce and pay off your debt. But awareness of current debt settlement laws will save you defeat and grief down the road.