Debt Settlement vs. Debt Dismissal. Which are the Differences?

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In this article, we’ll be sharing some financial knowledge with you. Today we would like to discuss debt settlement and debt dismissal settling. Debt settlement is a goal for most Americans. But what if you could get some of your debts dismissed?

When speaking to clients about the debt they are often asked wether they are interested in debt settlement or in debt dismissal. The response usually is: what’s the difference?

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In debt settlement a debtor and creditor agree to sell the entire debt as a reduced balance, often removing a significant portion of the debt. The settlement company handles the creditors but there can be negative outcomes for debt settlement. Some of these negative outcomes for debt settlement are:

  • owing taxes on the settled debt
  • a negative impact on your credit score
  • owing taxes on forgiven debt
  • a drop in credit score due to late payments while waiting for the settlement
  • having a late payment history that remains on your credit

Our paid settled status is not the same as a paid in full status. It is important to watch for these signs of fraud or and competence when dealing with debt settlement companies:

  • a company requesting that you pay fees before it settles your debts
  • a company pitching a new government program to bail out personal credit card debt if they guarantee they can make your unsecured debt go away
  • a company that tells you to stop communicating with your creditors but doesn’t explain the repercussions if they promised they can stop all debt collection calls and lawsuits
  • a company that guarantees your unsecured debts can be settled for a small fraction of the amount owed

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In debt dismissal, the burden to prove the debt is on the lender. If the debt buyer cannot produce proper documentation of the debt, the case could be dismissed. This means that your debt is no longer valid and you won’t have to pay any more to the debtor. Here are some reasons why debt collectors can have difficulties proving a debt inaccuracies and miscalculations:

  • legal technicalities
  • fraud
  • lack of records from the original creditor

If a debt collector tries to sue you, do not ignore the lawsuit. Many cases are dismissed when the consumer sends a written answer. In many claims there was never an intention to produce proof that a consumer owes the debt and the claim can’t be supported.

What exactly do debt dismissal programs? Do they try to get debt discharged based on inaccurate information and the lack of evidence? They demand validation and verification of the debt collectors legal authority to collect the debt and they look for signs of fraudulent debt collection practices related to the account violation of consumer rights. It can be enough to get the debt dismissed if the debt collector cannot provide accurate information that you owe the debt. You can get it dismissed.

Also, you might be a candidate for debt dismissal if:

  • you have been harassed by debt collectors after you ask them to quit calling you
  • you have been charged outrageous late fees
  • your name and personal information is inaccurate on the supposed debt
  • the service or goods were never received
  • someone else used your identity to accumulate the debt

In the end, is vital that you know what you’re trying to accomplish and what the program is offering before agreeing to the services. Ask plenty of questions, do your research, and know the possible outcomes – so you use a company that is trustworthy. Do you have any questions about debt dismissal? Ask them in the comments section below!

Published by Kidal Delonix (750 Posts)

Kidal Delonix is a contributor to Mr. Hoffman's blog. The views and opinions are entirely his/her own and may not reflect Mr Hoffman's views.

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