Debt settlement can be a viable alternative if you have non-exempt assets, or if you do not wish to file for bankruptcy protection. To settle a debt, we negotiate with your creditors to reduce the balance by 20% to 90%, depending on the situation.
The percentage reduction of each settlement varies with each creditor, and it is dependent upon many factors, such as your employment status, the value of your non-exempt assets, and the amount of equity in your house and other real properties, etc.
As a general rule, creditors won’t negotiate with consumers who are current on their bills. They usually refuse to discuss settlement unless you are at least a few months behind in your payments.
Even if a debt is settled, please be aware that your credit score will be affected each time you settle a debt.
You also need to consider the tax consquence of the settlement. Money saved in a settlement is generally considered earned income for tax purpose.
Please consult your tax professional for your particular situation.