I heard an advertisement on the radio the other day for a debt settlement company. The voice stated something to the effect of: We know you don’t want to file bankruptcy…and the company proposed the public to consider their debt settlement plan.
What the advertisement did not mention is the fact that in the IRS’ Internal Revenue Code there is a statute that states that forgiveness of debt is includible in your Gross Income. In English, that means there is a law that says if you settle with your creditors, you are taxed on the portion of the debt that is forgiven!
That means that even if you do a debt settlement plan, you may well be forced to later file bankruptcy due to IRS debt.
Debt settlement or debt consolidation companies are rarely the best solution.