that you may not be required to pay taxes on your forgiven debt if you can prove that you were “insolvent” at the time you settled your debt(s). In order to be classified as insolvent you need to have a negative net worth. In other words, you would owe more money than you’re actually worth and your liabilities would exceed your assets.

If you’re required to pay taxes on your forgiven debt, however, you may want to approach this topic from a different angle. For instance, if you save $30,000 through debt settlement, an

Debt negotiation (debt settlement) has increasingly become a popular choice in recent years as the solution to financial hardships experienced by many people. Unfortunately, there is much misinformation circulating on the Internet, radio and several publications, regarding the process of debt settlement.

• What is Debt Settlement?

Debt settlement is a process whereby individuals (or the debt negotiation firm they hire) negotiate with their creditors to reduce the pay-off balance on the amount of debt they owe. Depending on your personal circumstances, creditors will usually agree to accept 50% or less of what is actually owed. Once the agreed-upon funds have been received by your creditor, no further balance is owed and your account is “zeroed out.”

• Does Debt Settlement Affect Your Credit Score?

If you’ve been paying your bills on time, with no delinquencies on your record, yes, it’s highly likely that debt settlement will have a negative impact on your credit score. You see, before a creditor will agree to look at the possibility of accepting less than the full balance as payment in full, your account must be in a delinquent status. After all of your accounts are “settled,” and your credit report reflects a zero balance on each account, your credit score will begin to return to a number which is acceptable to obtain a conforming mortgage, auto loan, etc. This usually occurs within a few months of completing the entire process of debt settlement. For most people, however, peace of mind takes precedence over a temporarily reduced credit score.

• Is There a Tax Liability as a Result of Debt Settlement?

When a creditor agrees to settle an account for less than the full balance, they are required by the IRS to report the canceled debt on Form 1099, if the amount of the forgiven debt is $600 or greater. There’s also a good possibility that you may not be required to pay taxes on your forgiven debt if you can prove that you were “insolvent” at the time you settled your debt(s). In order to be classified as insolvent you need to have a negative net worth. In other words, you would owe more money than you’re actually worth and your liabilities would exceed your assets.

If you’re required to pay taxes on your forgiven debt, however, you may want to approach this topic from a different angle. For instance, if you save $30,000 through debt settlement, and

n the amount of debt they owe. Depending on your personal circumstances, creditors will usually agree to accept 50% or less of what is actually owed. Once the agreed-upon funds have been received by your creditor, no further balance is owed and your account is “zeroed out.”

• Does Debt Settlement Affect Your Credit Score?

If you’ve been paying your bills on time, with no delinquencies on your record, yes, it’s highly likely that debt settlement will have a negative impact on your credit score. You see, before a creditor will agree to look at the possibility of accepting less than the full balance as payment in full, your account must be in a delinquent status. After all of your accounts are “settled,” and your credit report reflects a zero balance on each account, your credit score will begin to return to a number which is acceptable to obtain a conforming mortgage, auto loan, etc. This usually occurs within a few months of completing the entire process of debt settlement. For most people, however, peace of mind takes precedence over a temporarily reduced credit score.

• Is There a Tax Liability as a Result of Debt Settlement?

When a creditor agrees to settle an account for less than the full balance, they are required by the IRS to report the canceled debt on Form 1099, if the amount of the forgiven debt is $600 or greater. There’s also a good possibility that you may not be required to pay taxes on your forgiven debt if you can prove that you were “insolvent” at the time you settled your debt(s). In order to be classified as insolvent you need to have a negative net worth. In other words, you would owe more money than you’re actually worth and your liabilities would exceed your assets.

If you’re required to pay taxes on your forgiven debt, however, you may want to approach this topic from a different angle. For instance, if you save $30,000 through debt settlement, an

e impact on your credit score. You see, before a creditor will agree to look at the possibility of accepting less than the full balance as payment in full, your account must be in a delinquent status. After all of your accounts are “settled,” and your credit report reflects a zero balance on each account, your credit score will begin to return to a number which is acceptable to obtain a conforming mortgage, auto loan, etc. This usually occurs within a few months of completing the entire process of debt settlement. For most people, however, peace of mind takes precedence over a temporarily reduced credit score.

• Is There a Tax Liability as a Result of Debt Settlement?

When a creditor agrees to settle an account for less than the full balance, they are required by the IRS to report the canceled debt on Form 1099, if the amount of the forgiven debt is $600 or greater. There’s also a good possibility that you may not be required to pay taxes on your forgiven debt if you can prove that you were “insolvent” at the time you settled your debt(s). In order to be classified as insolvent you need to have a negative net worth. In other words, you would owe more money than you’re actually worth and your liabilities would exceed your assets.

If you’re required to pay taxes on your forgiven debt, however, you may want to approach this topic from a different angle. For instance, if you save $30,000 through debt settlement, an

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