There are many options available to you if you're in deep debt, especially credit card debt. While debt settlement is one option, there are some things that you should know. Debt settlement critics don't always tell the whole story. There are three areas that you should focus on when trying to settle your debt for less than what you owe.

Choose your debt settlement company

If you are unsure about how to approach your creditors, it is best to work with a professional debt settlement company. What type of company should I choose? Although there are many companies out there, most are only interested in making a quick buck and not for you. Many companies exist to make quick money by taking your money and not putting in the effort to help you reach a settlement. You want a company that will quickly settle your debt and get you the best settlement possible.

The ideal company should offer you all options upfront and represent you with integrity. Before you sign anything, you should discuss costs and potential risks with the company. Also, make sure to check with the Better Business Bureau to ensure that the company you choose has a positive record. Move on if a company that you are considering has many unresolved issues.

A company should also be willing to work with you on a performance-based fee basis. This will give you the incentive to settle the best possible settlement.

What is the tax liability for my cancelled debt?

To scare people away, many critics of debt settlement programs use "tax liability" as a way to make them look bad. These programs have a tax liability. Cancelled debt exceeding $600 must be reported on form 1099-C to the IRS. The IRS considers this taxable income and will claim the amount on line 21 on your 1040 form.

But, there is also an insolvency rule that the IRS has. If your liabilities exceed your assets, you don't have to pay taxes on any canceled debt that is a result of a settlement. This is true for most people who choose a debt settlement option. It doesn't matter if you are actually insolvent. You simply need to fill out IRS Form 982 and provide documentation for the IRS. To know more details visit https://cpgcomplete.com/

You are likely already insolvent because you're in financial trouble. This will likely save you from having to pay taxes on the canceled loans. Fill out IRS Form 982 to document your insolvency. When you are ready to prepare your taxes following this type of settlement, consult a tax professional.

How about a credit score black mark?

Participating in debt settlement won't necessarily have a negative impact on your credit score. The "experts" may not tell you that and instead use it as a scare tactic to avoid participating in debt settlement programs.

Your credit score may have been negatively affected if you're considering debt settlement, bankruptcy or other serious solutions to your debt problems. Choosing debt settlement will not negatively affect your credit rating more than it already has.

You might actually see a better credit score if debt settlement is chosen than if nothing is done. Debt settlement will dramatically reduce your debt load and reduce your debt-to-income ratio. This will not occur if you choose to consolidate debt.

Bankruptcy is another way to get out of financial trouble. It can have a lasting negative impact on your credit score. If your creditors have taken you to court, it's not recommended.

If you are unable to make minimum credit card payments, or have been forced to stop paying them occasionally or regularly, then your credit score is already negatively affected. Your credit score will not be affected by debt settlement.

There are many benefits to debt settlement. It stops the calls and stops you worrying about your finances. Your balance will be reduced to 50% or less by debt settlement. These balances must be satisfied before the company that negotiates your settlement can show credit reports showing your account as "paid or satisfied". The negative effect on your credit rating will be temporary.