What happens if I cancel national Debt Relief?
National Debt Relief does not charge penalties or cancellation fees. You'll also get back the money you've accrued in your dedicated account. You won't have to pay if you're unsatisfied with the service due to National Debt Relief's Satisfaction Guarantee.
When you cancel, the provider will tell your creditors, so they might start charging you interest and late payment fees again, as well as expecting you to resume higher payments. You'll also have to deal with your creditors yourself again. Think about how you're going to cope with this.
If we can't settle your debt or if you're not satisfied up to the point of us settling your debts — for any reason — you can cancel anytime without any penalties or fees other than any fees earned associated with prior settled debts. That's right!
In certain situations a debt relief order (DRO) can be stopped (revoked). If this happens to you, you'll have to find another way to deal with the debts you owe.
The bottom line. Your credit score is important — and debt relief services may cause it to fall. But if your score has already been damaged by a series of poor financial habits it may be worth a temporary hit with debt relief now to improve your creditworthiness long-term.
The Bottom Line. If you are facing serious financial difficulties, you may be able to get all or a portion of your debts canceled. However, debt cancellation can have long-term negative consequences to your credit, and you should consider it only when there are no better alternatives for you.
In general, if your debt is canceled, forgiven, or discharged for less than the amount owed, the amount of the canceled debt is taxable. If taxable, you must report the canceled debt on your tax return for the year in which the cancellation occurred.
Debt relief can be a lifeline to help you get out from under unaffordable debt—but it can also damage your credit. So, if you're considering a form of debt relief, you'll want to bear in mind its effect on your credit report, where the information can stay for up to 10 years.
Debt relief can involve consolidation and debt counseling, which involves lowering the cost of repayment but also debt settlement which involves repaying less than is owed in a negotiated settlement with lenders. Bankruptcy involves seeking protection from creditors for debt that can not be repaid.
Using debt settlement options to reduce debt comes with several risks, including late payments on your credit report, potential charge-offs, settlement company fees, tax implications on forgiven balances, possible scams and the overall risk of settlement offers not working.
How many people have used national debt relief?
| State | Number of people who applied or were deemed automatically eligible for relief | Number of fully-approved applications sent to loan servicers for discharge |
|---|---|---|
| California | 2,315,000 | 1,473,000 |
| Colorado | 471,000 | 295,000 |
| Connecticut | 321,000 | 208,000 |
| Delaware | 81,000 | 52,000 |
A DRO stays on your credit file for six years from the date it is approved. It may be hard to take out credit during this time.
- Take advantage of debt relief programs.
- Use a home equity loan to cut the cost of interest.
- Use a 401k loan.
- Take advantage of balance transfer credit cards with promotional interest rates.
Bank accounts
After a DRO has been approved, your bank may stop letting you use your current bank account. If this happens, speak to your debt adviser to find out what options are available. Your debt adviser may be able to help you set up a new bank account which is not related to any of your debts.
Credit score impacts
When you use a debt settlement company like National Debt Relief, you can expect a credit drop by as much as 100 points; however, the company states that if you're able to settle your debts, the credit impact is about half of what it would be if you were to declare bankruptcy.
Yes, you can buy a home after debt settlement. You'll just have to meet the lender's requirements to qualify for a mortgage. Unfortunately, that could be harder after you settle debt.
While you can still use your open credit card accounts after debt consolidation, consumers should do so with caution. If you do use your credit card after debt consolidation, be sure to pay off your balance regularly.
Both debt settlement and bankruptcy can bring your credit score down and may show up on your credit report for years. Other types of debt cancellation, however, such as federal student loan forgiveness, won't negatively impact your credit score.
Summary: Ultimately, it's better to pay off a debt in full than settle. This will look better on your credit report and help you avoid a lawsuit. If you can't afford to pay off your debt fully, debt settlement is still a good option.
There are no direct taxes on a debt settlement, but if you save $600 or more, you will have to report the savings as income. To continue with the above example, the $2,000 you saved on that credit card debt is taxable income. You report it on your tax return and pay taxes based on your situation.
What are the pros and cons of debt settlement?
| Pros | Cons |
|---|---|
| Might be able to settle for less than what you owe | Creditors might not be willing to negotiate |
| Pay off debt sooner | Could come with fees |
| Stop calls from collection agencies | Could hurt your credit |
| Could help you avoid bankruptcy | Debt written off might be taxable |
Debt settlement is a risky way to reduce your debts. It will help you avoid bankruptcy, but depending on the settlement amount, you may be stuck paying extra taxes. Many debt settlement companies charge high fees and take years to negotiate your debts fully.
For instance, hiring a debt settlement company can leave you with severe credit damage and no spare cash, both of which make it harder to qualify for a mortgage. Once your debts are settled, you might need a few years to recover and become eligible for a conventional (meaning not government backed) mortgage.
And, depending on the program, you may be able to get your interest rate lowered or have certain fees waived. Under the terms of a debt management plan, while you may receive more favorable interest rates or relief from fees, you still repay the entire principal amount owed.
Working with a debt settlement company may lead to a creditor filing a debt collection lawsuit against you. Unless the debt settlement company settles all or most of your debts, the built-up penalties and fees on the unsettled debts may wipe out any savings the debt settlement company achieves on the debts it settles.
