What Kind Of Debt Qualifies For A Debt Settlement Program?
Not all debts are qualified to be entered into a debt settlement or debt negotiation program. Because of the nature of this type of debt relief and the process that is employed, only balances which are unsecured can be affected and reduced by this type of program.
Unsecured Versus Secured
Unsecured means unattached. Credit cards are just one example of unsecured debt. Whether they are Visa/MasterCard or local merchant or department store cards, most of these balances can be negotiated down to a fraction of what you owe. Unsecured signature loans and lines of credit (those not attached to personal property) will also qualify for debt settlement. Debts such as medical bills, automobile repossessions, old utility bills and past due rent are additional examples of unsecured qualified debt.
Secured means attached. Some loans are attached to your home; some to your car. Other loans and accounts may be attached to various household property or equipment. These are examples of secured debt and if you default on your financial obligations with these types of accounts, your creditors’ option is to repossess those items and sell them for what they are worth, thereby lowering, but not eliminating your debt. In most cases, you will have a great deal of money already invested in that property that will be put at risk and furthermore, you will likely owe a good sum of money on those accounts even after the property is sold. It may be wise to try and protect those items and retain them as your personal property.
Student loans, while seemingly unsecured, are surprisingly secured against your tax return. Most student loans are government backed, therefore if you default, the lender can simply make a claim with the government and the result will be seen in your future tax returns or lack of, as the case may be. Student loans may not be negotiated in a debt settlement program, just as they would not be discharged in a bankruptcy.
Federal and State taxes owed are also not qualified to be entered into a debt settlement program. You must seek the help of a tax professional or tax relief agency to resolve this type of debt situation.
Child support and alimony cannot be settled for any reason. Believe it or not, these debts may be secured against your freedom.
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