script type="application/ld+json"> { "@context": "http://schema.org", "@type": "Product", "name": "Delancey Street", "aggregateRating": { "@type": "AggregateRating", "ratingValue": "5", "reviewCount": "10" } } The Pros and Cons of Debt Settlement Companies | Delancey Street

 

The Harsh Reality: Debt Settlement’s Upsides and Downsides

Crushed under mountains of debt, hounded by creditors: for many – it feels suffocating. You’ve teetered on the edge of bankruptcy – but heard debt settlement companies can negotiate your way out. Is it too good to be true? Let’s rip off the Band-Aid: there are major pros, and risks you can’t ignore.

What Even Is Debt Settlement?

Let’s get on the same page: debt settlement is when you pay a company, they negotiate with your creditors to allow you to pay back less than you owe. In exchange for a lump sum payment, your creditors accept that amount as full payment on the debt.

The Glimmering Upside

One monstrous benefit jumps out: you could get released from all that debt while paying just a fraction of what you owe. For many strangled by debt, that potential life raft keeps hope alive.

The Hidden Costs Start Adding Up

Red flag: debt settlement companies typically charge 15-25% of your total debt load as fees1. So if you owe $25,000 in debt, an 18% fee is $4,500 – paid upfront before they even start negotiating.

That’s just the beginning: those companies also require you stop paying creditors, default on your accounts to force negotiation2. The result? Your credit score plummets, creditors ramp up interest rates, penalties pile up – and IRS taxes the forgiven debt as taxable income3.

Here’s a truth bomb: the average debt settlement fees and penalties can nearly equal the amount of debt you started with. Is digging out of that hole really easier?

Proceed With Extreme Caution

Look, taking the debt settlement route is playing with fire:

See also  Delaware Merchant Cash Advance Debt Relief Lawyers

– Your credit will get torched for years, making future loans, mortgages, car financing almost impossible
– If creditors refuse to settle, ALL that debt comes roaring back in one gut punch
– Debt settlement companies’ fees could exceed what you even owed in the first place

For many overwhelmed by debt, it may seem like the only option. But consider: have you truly exhausted ALL other avenues? Debt consolidation loans or 0% balance transfer cards could provide massive relief – without decimating your credit. Non-profit credit counseling could help restructure payments with creditors directly.

Even bankruptcy emerges as a better choice versus debt settlement’s massive downsides for many. Why gamble everything on an option that could leave you deeper in debt and financially crippled?

It Could Work…In the Right Situation

Now, debt settlement isn’t an automatic “no” for everyone. If you can’t qualify for bankruptcy, have almost no income or assets – and are bombarded with unaffordable payments – settling may allow a fresh start.

For most though, the gaping drawbacks simply outweigh the costs. There are smarter, lower-risk paths to get debt under control without blowing everything up.

The Bottom Line

Debt settlement companies dangle a tantalizing carrot: escape all those soul-crushing debts! But make no mistake, it carries extreme risk of harming your credit for years, incurring taxes, and potentially leaving you deeper in the hole. For many, it makes far more sense to first explore debt consolidation, structured repayment plans, or even bankruptcy – rather than gambling on an approach that tends to punish the consumer far more than it helps.

See also  Colorado Merchant Cash Advance Debt Relief Lawyers

So, Where Do You Stand?

If that unbearable debt burden keeps you up every night, help IS out there. But proceed with extreme caution before upending your financial situation through debt settlement. First, get a truly clear picture of ALL your options by speaking to a reputable credit counseling agency. Only then can you make a fully informed decision on whether the risks of debt settlement are truly worth it for your situation.

Citations:
1 https://www.consumer.ftc.gov/articles/0145-debt-relief-or-bankruptcy
2 https://www.nerdwallet.com/article/finance/debt-settlement-companies
3 https://www.experian.com/blogs/ask-experian/is-forgiven-debt-considered-taxable-income/

Delancey Street is here for you

Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

"Super fast, and super courteous, Delancey Street is amazing"
Leo
$500,000 MCA Restructured Over 3 Years
"Thanks for helping me in literally 24 hours"
Jason
$250,000 SBA Loan Offer in Compromise
"Great choice for business owners who need a trustworthy partner"
Mary
$350,000 MCA Restructured Over 2 Years

In The Media

Delancey Street CEO discusses ways to reward employees
Delancey Street CEO discusses the benefits of franchising on Forbes.
Delancey Street CEO discusses management on AMEX.
Beat Ctc Debt Collector

  Crush That CTC Debt Collector: A Merciless Gameplan They’re…

Is Pacific Debt Relief a reputable debt relief company?

  Is Pacific Debt Relief a Reputable Debt Relief Company?…

How is it possible for a bad credit to be fixed?

  Climbing Out of the Bad Credit Hole Sick of…

What is the effect of an AR factor on cash flow?

  The Brutal Truth: How AR Eats Into Your Cash…

What are the best credit card debt relief options?

  Crushing Credit Card Debt? Explore These Relief Pathways If…

Delancey Street simply gets it. You're talking to experts.
Steven Norris
Get Help Today

Ready To Get Started?

If you have questions, feel free to shoot us an email, or fill out our live chat.

Schedule Consultation