Debts That Settlement Can’t Fix

by guest on May 12, 2010

If you owe  student loans, back taxes or some other type of debts, you need to be aware that they cannot vanish into a debt settlement plan. Debt settlement  is a process of negotiating with creditors to accept payment that is less than the full amount of the debt owed, typically between 20% and 75% of what you owe — the creditor forgives the rest of your debt and starts reporting it to the credit bureaus as settled. This article published at bankrate  highlights some of these debts.

When you’re drowning in debt and dodging creditors, a debt settlement plan with one low monthly payment to a single creditor sounds like a dream solution. But some debts won’t go into that settlement bucket.

Here are some of those debts and what you can do about them.

Utility bills
Are you behind on a utility bill? In many instances, a call to your electric, gas, phone or water company might help.
“Typically, utility companies and local taxing entities will work out a payment plan and will let you pay it off on a monthly basis,” says Gail Cunningham of the National Foundation for Credit Counseling in Silver Spring, Md.

Student loans
If you’re trying to catch up on your college loans, the D-word is deferment, not debt settlement.
“Of all the different types of debt, (student loans) are fairly flexible to work with,” says Jessica Cecere, the president of the Consumer Credit Counseling Service of Palm Beach County and the Treasure Coast in Florida. “Payment plans on student loans can (be extended) for years — 30 years or more.”
But rarely are student loans forgiven, according to Bankrate’s Debt Adviser, Steve Bucci. So, Cecere says, eventually you’ll have to pay. “At some point, you can’t defer anymore,” she says.

The Internal Revenue Service
Your tax debts can’t go into a settlement plan. If you owe taxes but can’t pay the full amount, there are other ways to fulfill your government obligation. “You can apply to pay them over time,” Cecere says. “That’s something you have to be in contact with them about. You will pay interest. But if you don’t pay the IRS, they can garnish your wages.”

You also may be able to settle with the IRS. “It’s called an ‘offer in compromise,'” Cecere says. “You meet with an IRS representative and say, ‘There’s no way I can pay all this. What can we work out?'”
Even if the IRS makes the deal, you’ll have to pay taxes on the amount of debt that’s forgiven, Cunningham says.

Child support and alimony
Child support and alimony are legal, court-ordered obligations even if your checking account is empty. In some states, such as Florida, the court can take your driver’s license away for nonpayment, Cecere says. If you can’t pay, there is an answer. “Go to court. Document that you can’t pay,” she says.

 Secured Debt/Loan
You likely wouldn’t use debt settlement to make your car payment; mortgage or other secured debt, because those creditors don’t need a settlement plan. They can simply take your car or home, Cecere says.

“You need to take care of those things — your car, your house. Credit card bills are important, but if you have to choose between paying your Visa bill or making your house payment, you should make your house payment,” Cecere says.

For all debt, the key is communication. “It’s important to call and say, ‘I can’t make this payment. I’d like to work something out,'” Cecere says. “All they can say is no.”

You may also like:

{ 9 comments… read them below or add one }

Lakita | Personal Finance Journey May 12, 2010 at 10:42 am

Very informative! I didn’t know you could lose your driver’s license over child support. I’m all for taking measures to collect child support, but I don’t see how removing a license is productive. Having a car makes it easier to get to work and therefore earn the money to pay child support.

I suppose this is a last resort for those “dead beat dads” that are not working, coming to court, or otherwise unresponsive.


Joe May 13, 2010 at 7:03 am

@ Lakita i too would presume that taking the driver’s license from the child support defaulters would be the last resort.
Thanks for stopping by!


Stacy May 13, 2010 at 8:29 am

This is a well needed article and I appreciate the information given! I definitely will recommend this particular post to my family and friends.


Torrey May 13, 2010 at 5:15 pm

Thanks for posting this articles as many people will purposely let certain bills go into collection to settle for less than originally owed.


Arthur @ May 25, 2010 at 4:29 pm

good post.

I agree, taking someones driving ability away means they cant get to work. then you know they cant pay child support then.


Hoursecer June 4, 2013 at 8:48 pm

I simply wanted to compose a small message so as to thank you for some of the splendid concepts you are writing on this site. My extended internet look up has at the end been honored with reasonable concept to share with my companions. I ‘d claim that we site visitors actually are definitely lucky to be in a magnificent community with so many marvellous individuals with valuable techniques. I feel somewhat blessed to have encountered your entire website page and look forward to many more fun minutes reading here. Thanks a lot once again for everything.

Great article. It is extremely unfortunate that over the last one decade, the travel industry has already been able to to deal with terrorism, SARS, tsunamis, bird flu virus, swine flu, plus the first ever real global economic depression. Through all of it the industry has proven to be robust, resilient in addition to dynamic, acquiring new ways to deal with trouble. There are usually fresh problems and opportunity to which the industry must yet again adapt and reply.


Marsbytens99q February 10, 2017 at 1:49 pm
Purchasing a new or used automobile could be a tough procedure if you do not know what you are doing. By teaching yourself about vehicle store shopping before you head to the dealership, you can make points easier on your own. The following tips may help the next shopping vacation become more enjoyable.

Always bring a auto mechanic together when shopping for a brand new car. Vehicle retailers are popular for offering lemons and you do not wish to be their next victim. Provided you can not get yourself a mechanic to consider vehicles along with you, at least make sure that you have him take a look at closing choice before buying it.

Know your limits. Before you begin buying for your forthcoming automobile or van, decide how much you can afford to pay out, and stay with it. Don’t forget to add desire for your estimations. You can expect to pay out close to twenty percent as a payment in advance as well, so be well prepared.

Well before attending a car dealership, know what kind of automobile you want. Research most of you possibilities ahead of store shopping so that you can figure out what works for your finances and household demands. Seek information to learn how much you ought to pay to get a probable car.

Before you sign any deal make time to read every collection, for example the small print. If you have nearly anything outlined that you do not fully grasp, usually do not indication before you get an respond to that you simply comprehend. Unsavory salesmen are able to use a contract to insert numerous costs that had been not reviewed.

Should you keep your previous assistance at heart next time that you just go looking for a car, you may be very likely to get a full deal. Investing in a auto does not have to be a frustration. Use the guidelines with this write-up and you could have the vehicle you need at the good value.


OOOВалок_Виктор February 11, 2017 at 5:18 am

RE:Debts That Settlement Can’t Fix НПП Валок Наплавка рабочих валков


Edwinskefe February 26, 2017 at 11:39 pm

Do you basic app installs so you can increase in the app trust in chart? Then we can commandeer you. We do provender app installs with a view alone 0.04$ per install. We do provide app installs seeking both Android and IOS apps. All our installs are from honest users.

buy apps for free


Leave a Comment

{ 1 trackback }

Previous post:

Next post: