Interesting story from my cousin who just went through a big debt settlement. He has student and credit card debt, but interestingly the student debt was held by the school. He was able to negotiate a work/debt relief program where we was a summer teacher for a couple of years. I had never heard of this before, but it seemed to work well for both parties.

Lexie wrote:

FrankN wrote:

Moneyes wrote: At the end of the day, this is all a really good lesson as to why you should avoid debt whenever possible. More than just a bad credit score, but the hassle of getting out of debt.

It's easy to get in, hard to get out.

It is very easy to get in (and sometimes fun!) and its very hard to get out (and always horrible to get out!)

So true FrankN. In the matter of my son, he was very young and just didn't keep track of what he was spending. The debt was clearly his own fault and he paid the price as we all do when things get out of hand. I really think there should be a required high school course that teaches life skills to our kids today. Don't you?

100% I do. I think its a life lesson that has to be taught in high school.

FrankN wrote:

Moneyes wrote: At the end of the day, this is all a really good lesson as to why you should avoid debt whenever possible. More than just a bad credit score, but the hassle of getting out of debt.

It's easy to get in, hard to get out.

It is very easy to get in (and sometimes fun!) and its very hard to get out (and always horrible to get out!)

So true FrankN. In the matter of my son, he was very young and just didn't keep track of what he was spending. The debt was clearly his own fault and he paid the price as we all do when things get out of hand. I really think there should be a required high school course that teaches life skills to our kids today. Don't you?

Moneyes wrote: At the end of the day, this is all a really good lesson as to why you should avoid debt whenever possible. More than just a bad credit score, but the hassle of getting out of debt.

It's easy to get in, hard to get out.

It is very easy to get in (and sometimes fun!) and its very hard to get out (and always horrible to get out!)

At the end of the day, this is all a really good lesson as to why you should avoid debt whenever possible. More than just a bad credit score, but the hassle of getting out of debt.

It's easy to get in, hard to get out.

And certainly not faulting your son, I think that is why we should try and teach people about this as much as possible so they can get a hold of the problem before it gets unbearable to deal with. I wish they weren't able to punish you with all the interest/penalties/fees, but as of right now they can.

FrankN wrote:

Lexie wrote: If only you could get the debtor to stop the late fees, the debt would be manageable in many cases. But no...... those fees continue to accrue and the debts becomes more. That's one of the reasons we opted for bankruptcy instead of letting an outside company handle the situation. Since you have to pay them too, we took what we thought was a more direct approach.

The fees, additional interest penalties, and other penalties are how they make a situation from bad to impossible. I wish there were more rules and regulations around that.

I do too FrankN. My son had an outstanding credit card bill that whet from manageable to totally impossible because of interest and late fees. The more he tried to pay on the bill the worse it got. He finally had to give up and let it bring his credit rating down.

Lexie wrote: If only you could get the debtor to stop the late fees, the debt would be manageable in many cases. But no...... those fees continue to accrue and the debts becomes more. That's one of the reasons we opted for bankruptcy instead of letting an outside company handle the situation. Since you have to pay them too, we took what we thought was a more direct approach.

The fees, additional interest penalties, and other penalties are how they make a situation from bad to impossible. I wish there were more rules and regulations around that.

If only you could get the debtor to stop the late fees, the debt would be manageable in many cases. But no...... those fees continue to accrue and the debts becomes more. That's one of the reasons we opted for bankruptcy instead of letting an outside company handle the situation. Since you have to pay them too, we took what we thought was a more direct approach.

You are not only paying the company to settle your debt, but it sounds like you are paying them to make it as well. Where is the sense in that? You have the money to pay the bills every month, yet give it to a company to hold until it goes into default? Shouldn't there be a law against that? If not, then that company found an easy way to make money.

I agree with JGibbs. Depending on the state, you could be looking at quite a tax bill at the end of debt settlement. You really need to look at the advantages of debt settlement and paying on the debt together to see which will be the better advantage to you. You never know, it might just be a better bet for you to pay down the debt.

JGibbs wrote: Pinky, do you know if you're required to pay state taxes on that money too? I have a large student loan and I bet I'll have to pay a huge tax bill once my twenty years or so are up. If the loan forgiveness program even exists that long.

It depends on the state. Some state require tax payments on them while a few do not.

Pinky, do you know if you're required to pay state taxes on that money too? I have a large student loan and I bet I'll have to pay a huge tax bill once my twenty years or so are up. If the loan forgiveness program even exists that long.

The taxes are due at the end of the year (i.e., December 31st). It would probably be beneficial to pay them immediately upon the settlement being paid, however, you could wait. You can take longer to pay but there will be penalties and interest. The IRS doesn't forgive or forget!

Pinky, when does a person have to pay those taxes? It it immediately? Do you know if a settlement winds up being "more gentle" on a FICO score than a bankruptcy? I would imagine so.