This morning I saw a commercial for a debt forgiveness program. It’s not the first time I’ve seen the commercial and other ones like it. It sounds really great. Just wipe away your credit card debt without declaring bankruptcy. I’ve known for years that you can call your creditors and negotiate a repayment of a fraction of what you owe. The theory is that the creditor will be grateful for any payment and a settled account is better than one that ends in default. What you’ll find, though, is that creditors don’t want to settle the debt. Why should they? You owe what you owe. If you are able to negotiate a settlement, either on your own or through a settlement negotiator, like the commercial I saw, you will have to write off the settled amount on your taxes. It’s not a free lunch. It’s just not freely disclosed. Any settled debt is considered income and has to be declared on your income taxes. The creditor will send a 1099 to both you and the IRS to show the forgiven amount.
To get out of debt you have to stop getting into it. That means putting all credit cards away. Cut them up. Do whatever it is that you have to do to not incur more personal unsecured debt. Take a look at all that you owe and what your interest rates are. There are two schools of thought. One is to tackle your rates of interest starting with the highest to save in interest over the long term. The other is to pay off your lowest balances first so you have a sense of accomplishment and will keep going.
Getting out of debt is not easy nor fast. Getting into debt was easy, but probably took time. Give yourself time to get out.