A debt settlement company can be your salvation, if you’re on the verge of filing bankruptcy. These agencies are a great alternative to bankruptcy and can have you out of debt in 3 years or less. But there is also a downside to settlement agencies.

As I said before, debt settlement can have you out of debt very quickly. The reason you are able to pay off your debt so quickly is because your credit card balances are reduced though a negotiation process with your lender and you are paying less than what is actually owed on the account. Any time you are paying less than what is owed, there will be negative consequences and these will be seen on your credit record.

For most people this may not be such a major issue, because if you’re seeking debt settlement your credit probably already has several negative marks on it. If you have no negative marks on your credit and are still able to make 2% payment on your credit cards each month, as long as you’re not more than two to three months behind, you may want to consider credit counseling as a debt relief option.

Also, you will receive a 1099 on any amount over $600 that has been written off by your credit card company. So, in essence, you will be taxed on the amount that the lender has forgiven. For people with a large amount of debt, it is still going to cost them less to settle their debts and pay taxes on the written off amount than to pay the balances in full. It is also possible that you will still receive collection calls from your lenders while you are in the debt negotiation process.

While debt settlement is probably the quickest option you’re going to find for getting out of debt, there are some things you will need to consider before deciding that it is debt relief option that is best for you. Most debt settlement companies will only allow persons to enroll if they have more than $10,000 in unsecured debt. That does not stop you from settling debts with your credit card companies on your own.

If you have debt, the sooner you research your debt relief options the more alternatives you will have available. Beginning debt relief early will give you the best possible outcome for your financial stability.