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Guest Post on Credit Settlement / Debt Settlement

My name is Stephen Kehl. I am Samantha's paralegal, her computer guy, office manager, her husband and whatever she has for me at the moment.  She keeps me very busy.  She asked me to do a guest blog post on a topic I hear about from potential clients everyday: credit settlement / debt settlement.
 
 I'm usually the first person that talks to people as they come in for first appointments.  A lot of them have tried credit card settlement.  Here are the most common complaints I hear:
  1. I let a credit card settlement company take drafts from my bank account every month.  They took hundreds or thousands of dollars.  They did nothing to settle my debts.  Now they are gone and so is my money.  They were a scam.
  2. I have been paying a credit card settlement company for about a year now.  So far they have been able to settle with some of the credit cards, but not all of them.  They have been TRYING to settle with the other.  I just received notice that one of the cards they were TRYING to settle with has now filed a lawsuit against me and I have 10 days to answer.
  3. I was able to use a debt settlement company to settle $75,000.00 worth of credit card debt for $30,000.00.  I was so happy until I received $45,000.00 in 1099's that have also been sent to the IRS.  I am going to owe thousands of dollars to the IRS.  What can I do? 
For complaint #1, we have seen a lot more clients that were lured into sending a fake settlement company money.  They may have found the company on the Internet, received mail or seen a TV commercial.  The company may have a local office or they may not.  We have also seen a lot of fake tax settlement companies even law firms.  The IRS very rarely settles.
 
For complaint #2, the key word is TRYING.  Settlement is optional.  The credit card companies or their collection agencies don't have to.  While the settlement company is TRYING to settle with a credit card company, they aren't making payments.  The money is going into a settlement fund in case they decide to settle or towards other companies that have settled.  That is why you now have been sued by a credit card company that has not been paid 
for many months.
 
For complaint #3, this is the bad side of debt settlement that the settlement companies tend not to tell their clients or bury in their paperwork.  The credit card companies are required by Federal law to submit a 1099-C for forgiveness of debt for any amount they settle for.  You can read about this on the IRS's website here.  This is to keep the wealthy from using loans to get around the inheritance tax by making loans to their heirs and then forgiving them. If you are settling a large debt, it is like you worked a part-time or full-time job on the side and did not have any withholding for taxes.  The IRS can charge more in interest and penalties than the credit cards themselves.  We have clients that have had to file bankruptcy for IRS debt alone.
 
These have been my observations in the 2 years that I have been Samantha's paralegal and talking with hundreds of people that have come in for help.  I must legally remind every one that I am just a paralegal and do not have a license to practice law.  Samantha supervises my work, including this post.
If you are drowning in debt, please call the Kehl Law Firm, PC at 254-633-2876 to make a free, no-obligation consultation to learn what your options are. Let my family help yours.
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