What are the risks of debt settlement?

Debt settlement is an important tool for helping debtors in North Carolina clear their unsecured debts, but it is not without risks. The primary risk of debt settlement is that it can be difficult to achieve the desired results. It requires the debtor to negotiate with creditors, which can be a difficult and time-consuming process. Additionally, creditors may refuse to negotiate or may demand more money than the debtor can afford to pay. Another risk of debt settlement is that creditors may not forgive the full amount of debt. Instead, they may settle for a lower amount and report the difference as income on the debtor’s taxes. This may increase the amount of taxes the debtor is liable for, leading to a further financial burden. Debt settlement can also have an effect on a person’s credit score. Since the debtor is making arrangements to repay a lower amount than they originally owed, the creditor may report the settlement as a negative item on the credit report which can lower the debtor’s credit score. This can make it more difficult for the debtor to get approved for credit in the future. Finally, debt settlement can result in legal action taken against the debtor by the creditor. If the debtor is unable to settle their debt, the creditor could sue the debtors, resulting in court fees, judgments, and wage garnishment. Given these risks, it is important for debtors to understand the potential consequences of debt settlement prior to making any agreements with creditors.

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What are the risks of debt settlement?

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