Omega Financial Solutions

Also known as Debt Negotiation,
is an aggressive approach to debt reduction, which is appropriate for debtors with a serious amount of debt or who are considering bankruptcy. A debt settlement company negotiates with the creditors to settle the debt for a lower amount than owed, as the debtor saves their money for a lump-sum settlement payment. After the debt is settled, the creditor will send a letter stating the debt obligation was fulfilled, and will report to the credit bureaus that the debt has been, “Settled for less than full amount”, “Paid” or “Settled”.

Creditors will usually settle for less than owed when the debtor is under serious financial strain because if the debtor chooses to file bankruptcy, then the creditor gets nothing. Creditors want to get as much money back as they can.

Debt Settlement is a way to get out of debt in the shortest amount of time, and with the least amount of money without filing for bankruptcy. There are some drawbacks though. The IRS considers a forgiven debt as taxable income, so at the end of the year, they will expect taxes to be paid on the settlement. The IRS, however, has a form (#982) available for special hardships. Debt Settlement can also be harmful to a debtor’s credit-rating while they are in the process of settling their debts because creditors won’t agree to settle on an account that remains current. The debtor’s credit report will reflect that they are behind in payments until the debts are settled.