A common question is, what are the pros and cons of debt settlement?
And the obvious pro is that if you have a $10,000 credit card and we settled it for $3,000, you just had a $7,000 savings.
Now some of the cons are, that same $7,000 saving can result in a 1099 Cancellation of Debt.
So the credit card we settled with will issue a $7,000 1099 to you and to the IRS.
Now, most folks don't have to pay taxes because they are insolvent, they have losses.
For our clients, it's fairly rare that there's a tax consequence.
Now, A further benefit and consequence is the credit report.
Your credit reporting is going to be neutral. When you settle that debt for $3,000 with the $10,000 credit card, your credit reporting is going to likely say "settled or paid for an amount less than the full amount." So it's neutral, not horrible, it doesn't say judgment or bankruptcy or foreclosure. But it doesn't say "paid in full" either which is perfect.
Now would I say saving $7,000 far outweighs the potential tax and credit reporting? Absolutely.
$7,000 savings in this example is far more than the cost of tax or the credit report.