When the credit card bills keep arriving, you’re barely paying your minimums and you’re at a breaking point, what can you do? Take a deep breath and read on because FOX 46 is getting you results.
First, it’s tempting to fall for those offers where they offer to settle your debts for you but don’t do it, according to Money Management International’s Jonathan Wolfsohn.
“These companies will take your money, they will not pay your creditors, they will hold your money in a joint trust account,” he says. After 5 or 6 months, the companies offer structured settlements to your creditors but creditors don’t always agree to them. In the meantime, you’re doing major damage to your financial reputation.
“Not paying your creditors for 5 to 6 months will absolutely negatively impact your credit score. There’s the very real possibility that they won’t accept the settlements which could subject you to all sorts of additional problems,” including legal action, wage garnishments and even liens.
Even if you end up saving money by settling those debts, you may owe taxes on what you saved.
“The IRS considers any amount of debt forgiven over $600 on revolving debt as income. So the portion that you don’t pay in the settlement, you’ll get a 1099 form from the IRS and there’s a very real possibility that you’ll end up having to pay federal income tax.”
So what can you do?
Consider a credit counseling organization like Money Management International. They’re a non-profit with an A+ rating by the Better Business Bureau and accredited with the National Foundation for Credit Counseling. One major plus?
“None of us work on commission. So none of us has an ulterior motive or reason to set you up on the program.”
Here’s how it works: clients meet with financial counselors to understand the full extent of their financial situations and create debt management plans.
“It’s a 3 to 5 year repayment program. We have agreements in place with the creditors to reduce your interest rates to get more of what you’re sending in each month applied to the principal amount you owe instead as opposed to finance charges.”
You still have to pay your debts but at much lower interest rates, with one monthly payment and much less stress.