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Q:
Are there any downsides to debt negotiation?

I’ve heard a lot about debt negotiation lately. Paying less than I owe sounds great, but I am skeptical. Are there any downsides? -Erik

Erik,

Debt negotiation is the same as debt settlement. How much the collection agency will settle for depends on your negotiating skills. But you must be aware, if they accept your settlement offer, you must send in the settlement balance immediately. The collection agency will not accept payments on a settlement offer.

Another factor you have to take into consideration on a settlement offer is how it will affect your credit report. When you settle with a creditor, the creditor typically reports that you still have a balance remaining but the account has been "settled in full." This derogatory "settled in full" notation will remain on your credit bureau file for seven years.

There may also be tax implications to a settlement, so please check with an accountant about this issue.


Good luck with your decision,

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