Debtor’s can’t afford the payment(s). The number one reason most debt settlement schemes don’t work is because the debtor cannot afford the payment(s). Most debt settlement schemes require large upfront payments to the debt settlement firm which will be redirected to the creditor (minus the debt settlement firm’s fees). However, most debtors are severely cash strapped and can’t afford to pay.The debt settlement firm is often unable to negotiate repayment/settlement amounts with all of the debtor’s creditors. As we have mentioned in the past, many creditors will not work with debt settlement companies because of their shady reputations. This fact can make it difficult for a debt settlement firm to negotiate all of the debtor’s accounts. Unfortunately for the debtor, they may be able to settle one debt while the other creditors mercilessly pursue them for payment via lawsuits.
Creditors are not legally obligated to negotiate with debt settlement firms or even the debtor. Bottom-line: You can’t legally make the creditor accept less than what you owe outside of filing bankruptcy.
Many debt settlement firms are unable to negotiate significant discounts on existing debt that will offset the fees they charge debtors. Debtors need to look carefully at how much they are actually saving “before” they commit to working with a debt settlement company. Get all fees upfront and in writing.
Debtors who use a debt settlement firm often end up owing the IRS. Forgiven debt (except in the case of bankruptcy) is taxable. Debtors using debt settlement need to consider the taxes they will owe on forgiven debt.
Many debt settlement firms are not reputable. There have been many unfortunate situations where debtors seeking the help of a debt settlement firm are bilked out of thousands of dollars. Don’t be a victim, do your research.

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