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Debt Settlement USA

Updated on May 13, 2011


You have probably heard of Debt Settlement USA via online and are seeking out information about the company or information in general about settling with creditors. Debt Settlement USA claims that couples or individuals can trim down unsecured debts that are owed in a year and a half to three years, depending on the amounts that are owed to creditors. The debt settlement firm also states that they will organize debts so that the debtor will only have to pay one payment per month that is reasonably set. Before you settle any money that you owe to creditors, you should first learn several tips to help you avoid being scammed by any type of debt settlement firm.

Did you know that in September of 2010, new regulations were passed that debt settlement companies are no longer allowed to make promises that they can cut debts into half? A new law goes into effect in October 2010 where they will no longer be able to collect a cent (upfront fees) until debts are reduced or taken care of. See the resource below at the end of this hub to read the entire CNN article about new regulations.

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Debt Settlement USA Business Practices

The debt settlement company states that it handles anything from credit card debt to past due utility bills. This firm only handles unsecured debts. Student loans, mortgages, auto loans, and funds that are owed to the Internal Revenue Service are excluded from their program. Those forms of debts are secured. For each line of credit that the individual is behind in, it must equal a thousand dollars or more and the total amount that is owed from all creditors must be twelve thousand dollars or more to eligible for their program.

What Some Debt Settlement Companies Do Not Tell You

Some debt companies often fail to mention that if the firm settles your debt for less owed, that you will receive a 1099 form for that amount or amounts that were forgiven from whom ever owns the debt(s). For example, if you owe $20,000 to X Bank and you work out a settlement of $12,000, then the remaining $8,000 forgiven will be wrote off by debt holder and a 1099 issue will be sent to you for that tax year. This means that you will either need to prove that you were “insolvent” at the time of the settlement or add the amount onto your yearly income for that year. If you plan to use Debt Settlement USA or another type of firm, consider speaking to your tax professional before doing so. He or she will be able to offer you the best tax advice in handling the proceedings. Keep in mind that a hefty 1099 may put you into a higher tax bracket; thus, you will have to pay in a lot more to the IRS. Visit the IRS website at and type in “Form 982” in the site’s search box to read information and guidelines on what is needed to prove insolvency.

Debt Collectors or settlement firms may also charge a percentage of your total debts for use of their services. Often times, some firms use the first several or even many of the payments that are first made to use toward their services before any funds are put towards the old debts that are owed to other debt owners. This is to change by law to prohibit such practices in October 2010.

Steps to Take to Protect Yourself with Debt Settlement USA and Other Similar Firms

1). Visit the Better Business Bureau at and read information about the USA firm and other companies. Read over the grade that the BBB has given before making a decision to settle any of your debts with a specific company.

2). Know your rights when it comes to debt collector practices. Debt collectors are not to call individuals and couples between certain hours, threaten and use other practices to collect funds that are owed. Visit the Federal Trade Commission at and click on “Consumer Protection” to learn your rights when it comes to past due bills and debts. If you find that a debt collector has broken the law, you can also file a claim via the website under the tab titled, “Consumer Protection.” You will notice another smaller tab titled, “File a Complaint,” that is where you may file a complaint against a firm or business.

3). Consider talking to an attorney about your case before you sign a binding contract with a debt settlement firm, like Debt Settlement USA. If you cannot afford an attorney, contact the courthouse in the county that you reside in and ask for a referral for legal aid or free legal services. Some counties may have legal aid for low income individuals who need help. You can also contact a few law schools in your area and see if you can get a referral to an attorney that may provide minimal legal services by reading over the contract by a debt settlement company. Take all of your paperwork with you, including statements from the original lenders.

More Help With Debt Settlement USA and Other Firms

Be wary of Debt Settlement USA and other companies until you do proper research on what you can do to settle old debts. See the video above for helpful tips.
Be wary of Debt Settlement USA and other companies until you do proper research on what you can do to settle old debts. See the video above for helpful tips.

Resource for This Hub


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