Debt settlement programs, for some consumers, can be an excellent way to dig out of a desperate financial situation. Though they typically have a negative impact on credit score and taxes, many debtors find participation in one their best option to “start fresh”, so to speak. But, contrary to commonly held belief, not all debts can simply be wiped away through participation in a debt settlement program.
Generally speaking, certain conditions must exist for most creditors to even consider settlement negotiations. If you’re able to make minimum payments on, for instance, your credit cards, you shouldn’t expect to get a credit card debt help for settlement process under way. In fact, one of the actions that many debt settlement lawyers require of their clients is to stop making payments on all debts. The implication is that, in order to enter a settlement program with your creditors, you must truly be completely unable to meet payments and interest charges.
Because debt settlement programs are considered relatively drastic, certain unsubstantial debts are often out of the question as well. For example, if you owe under $1,000 on a given credit card, it is overwhelmingly unlikely that that debt can be negotiated or settled. Even people in the most dire financial circumstances wouldn’t be able to pull it off. The reasoning for this is that the costs of settlement, including legal consultation and debt settlement company fees, are simply too high to justify the negotiations.
In addition to these general principles, certain specific debts are legally not negotiable. Federal law prohibits the settling of student loan debts whether they are government subsidized or not. Creditors who have liens on taxes, as well, are always entitled to the full amount owed regardless of the debtor’s financial situation. And certain industries – most notoriously the credit card industry – are known for having very strict policies against settling debts with their customers. And, considering the vast resources they have at their disposal, they usually win the battle against those trying to negotiate their debts.