What are the risks of choosing to settle a debt?

When choosing to settle a debt in Nebraska, there are a few risks one should be aware of. The first risk is that the creditor is not legally obligated to accept a settlement. This means that by attempting to settle the debt, one may not save any money. A second risk is that settling the debt will have a negative effect on one’s credit score. When a debt is settled, it will remain on one’s credit report and will show that only a partial payment was made. This can have a lasting effect for years. A third risk is that the creditor may attempt to collect the full amount of the debt from the individual. This is because settling a debt does not completely eliminate the debt. The creditor still technically has the right to try and collect the full amount, even though the individual has already settled the debt. A fourth risk is that the creditor may report the unpaid portion of the debt to the Internal Revenue Service (IRS). The IRS may then try to collect the unpaid portion of the debt from the individual as additional taxes. By being aware of these risks, one can make an informed decision and weigh the options before choosing to settle a debt.

Related FAQs

How long does it take to complete a debt settlement?
What happens if I miss a payment on a debt settlement?
Do I need to hire a lawyer to negotiate a debt settlement?
Should I be wary of any companies offering “instant” debt settlement?
Can creditors refuse to negotiate a debt settlement?
What is a debt settlement plan and how does it work?
When is it best to pursue debt settlement?
Is it possible to settle a debt for less than the amount owed?
What is the process for appealing a denied debt settlement?
Are there any potential risks if I choose not to settle my debts?

What are the risks of choosing to settle a debt?

Related FAQs

Related Blog Posts