Unless you’re insolvent, you’ll likely have to pay tax on the amount of forgiven debt that exceeds $600.
All that aside, the real problem with using debt settlement to get rid of debts occurs when you contract the help of a debt settlement company.
While there are some reputable ones out there, many of them charge exorbitant fees for their services and promise their clients more than they’re capable of delivering.
Unless you’re just extremely gun shy about talking to your creditors, you can settle debts on your own and keep more money in your pocket in the process.
With the exception of hitting the lottery or inheriting a windfall, finding a way to pay off debt usually isn’t a quick fix. If you’re contemplating any of these four options, it’s to your advantage to go back to the drawing board and see if you can’t find other ways to do it first.
Taking on a side hustle to bring in more money that you can put towards debt or transferring your balances to a 0% interest credit card, for example, are good places to start and they’re less likely to put you deeper in the red.