Guest Post by Olivia Tremlett

I have often met people having debt problems but they don’t seem to take steps like negotiating with creditors, to get rid of their debt. As a result, many have to file for bankruptcy. My friend, Amanda also fell into this debt problem. But, she took some steps and succeeded in getting out of it, through a debt settlement program. I will share with you the story, as I feel it will empower you to tackle your debts effectively, rather than doing nothing to get rid of the problem.

What debt settlement means

When you have incurred a huge amount of credit card debt, you can negotiate to settle your debt for less than what you owe. You can do the settlement on your own or get help of a third party professional and enroll yourself in a debt settlement program.

With this program you can reduce your outstanding debt balance by 40% to 60%. However, if the forgiven amount is more than $600, you may have to pay tax to the IRS on the forgiven debt. You need to deposit a fixed amount to your settlement company every month. When the amount accumulates into a lump sum, the company will pay your creditors.

How Amanda’s debt got settled

Amanda had 3 credit cards from banks X, Y and Z. The company she worked for decided to downsize and she got laid off from her job. As a result, she could not make payments towards her credit card debt. She felt embarrassed to contact her creditors and tell them about the recent financial problem. She hesitated to discuss this matter with any of her close friends, neighbors, relatives or an attorney. As a result, her outstanding balances with banks, X, Y and Z accumulated to $5,000, $20,000 and $30,000, respectively.

In the mean time Amanda managed to get a part-time job and she decided to contact bank X for a settlement. She informed the bank representative about the recent change in her financial condition. However, as the amount was less than $10,000, the bank representative told her that she could not go for a debt settlement. So, Amanda decided to take advantage of life insurance settlement and sold her life policy. She was paid a lump sum amount and with that she paid off her debt in full.

In the mean time, banks Y and Z had sent her debts to the collection agency. Amanda got her credit report and found that her credit score has taken a big hit! Due to non-payments, her credit score has gone down to 590 from 650! She consulted her next door neighbor, who advised her to take help of a settlement company.

Amanda searched the internet and checked the authenticity and reliability of the debt settlement company with the BBB. She went there and the company representative listened to her predicament. He carefully analyzed Amanda’s financial condition and prepare a budget, so that she could save more.

The representative then negotiated a settlement with the collection agencies. Her total debt amount in both the banks (around was $50,000), got reduced by 40% and she had to pay just $20,000. However, the representative told her that she would have to pay tax on the forgiven debt which was around $30,000 to the IRS. Amanda had to pay a fixed amount each month, to the settlement company. The representative calculated and Amanda found that she could pay off both her debts in just 4 years!

Today, Amanda is a happy person, free from any financial stress. She has successfully paid off her debts through a debt settlement program, and she resists the temptation to purchase anything she sees using her credit cards.