What are the risks of choosing to settle a debt?

Choosing to settle a debt can be a risky decision. Debt settlement involves negotiating with creditors to pay back a reduced amount of debt in exchange for an agreement to forgive the remainder of the debt. Although this can result in reducing the amount of money the debtor has to pay back, debt settlement comes with risks. The main risk associated with debt settlement is that the debt may end up on the debtor’s credit report. In North Carolina, creditors may report settlement agreements to the three major credit reporting bureaus. This means that a debtor’s credit score could be negatively impacted. Additionally, creditors may also charge a fee for debt settlement and the debtor may be required to pay taxes on the forgiven portion of the debt. This could lead to the debtor paying more than originally owed in the long run. Finally, debt settlement may not actually help the debtor escape a financial struggle. If the debtor simply does not have the money to pay off the agreement, the creditor could take legal action such as filing a lawsuit. This could result in the debtor owing more in court costs and attorney fees. In conclusion, debt settlement can be a risky decision and should only be considered after researching all the potential outcomes. It is important for debtors to understand the risks of debt settlement before making a decision in North Carolina.

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What are the risks of choosing to settle a debt?

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