Virginia residents who owe credit card debt are expected to repay it in full. They may also be liable for interest charges and other fees that a lender may charge. While a credit card debt settlement may be one way to obtain relief, it isn’t necessarily a debtor’s best option. Those who choose to work with a debt settlement company could be charged a fee that is equal to a percentage of the amount forgiven.
Settling a debt could have negative consequences for a person’s credit score even if an individual pays the entire amount. This is because a creditor will likely tell the credit agencies that a debt was paid for less than the full amount. If a settlement is reported to a credit agency, it will remain on a person’s credit history for up to seven years.
If a debt is forgiven, it could be considered taxable income by the IRS. However, this is generally only true if more than $600 is forgiven, and debtors who are insolvent may also not have to pay taxes on that amount. Debtors should also understand that there is no guarantee that a debt will be forgiven. Typically, there must be proof of a significant hardship before a credit card company will engage in such talks.
Filing for Chapter 13 bankruptcy may help an individual reorganize credit card or other types of debts. It may also allow a debtor to keep his or her home or other property while the case is ongoing. Those who need more information about the process of filing for bankruptcy may benefit from consulting with an attorney.