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What are the legal consequences of settling debt for less than what is owed?
A credit repair company has negotiated a settlement with my credit card company to settle my debt for less money than I owe them. I’m going to sign the papers and send the money, does this have any legal implications for me?
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Answers (1)
The answer to your question depends on what you mean by “legal implications.” Depending on the nature of the document you are signing, it may be considered to be a legally binding contract which obligates you to comply with its terms. That is a question that is best answered by an experienced attorney, who can review papers you are signing to determine the implications those papers have on your legal rights. It is also important to understand that settling debt for less than what you owe may have tax implications, as the forgiven amount of the debt is considered to be income in many cases.
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Posted by Christy Rakoczy on 21 Jan 2010
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