Debt settlement may appear to be a flawless situation for those
, drowning in debts and gasping for fast relief from the situation. But it is very important to remember that every system has its loopholes and unless dealt with careful options and approach, may lead to more financial mess. Let us have a look at some of the negative implications of debt settlement:
? In majority of cases the creditors are unhappy with consumer Debt settlement and reduce the credit score considerably because debt settlement option debars the consumer from paying the actual amount of the outstanding balance.
? Due to recession and problems of debt, a large number of debt settlement agencies have mushroomed and many are not legitimate to handle the disarrayed finances of consumers. This is a major problem that almost all Americans have faced and are still facing; even if they would decide on a particular agency to get rid of their debts it may take a while before they discover the fallacies of the agency and default in payments.
? With overburdened debts, consumers are already in deep waters and the exorbitant fees charged by the debt settlement agencies can deepen the financial chaos. Some of these agencies may ask for a percentage of the total debts and others charge a share of the debt savings along with other processing charges and monthly fees; however a new code of law by the FTC says that those agencies which handle debt cases over telephone may now have to follow stricter guidelines to serve the consumer better.
? Further to this, there has hardly been a trial or a research to ensure that these agencies are actually successful in settling consumer debts.
? With debt settlement, there are mandatory tax implications which are a necessary troubleshooter for consumers, already troubled with massive debts.
Though debt settlement may not have any legal consequences on those debtors who have opted for this option, a consistent approach to the entire process of debt relief can bring better results.