Consolidating debt without bankruptcy

Debt is costly and can prevent us from reaching financial goals (or at least prevent us from reaching them when we’d like to).Some people consider credit card debt bad and mortgage or student loan debt good.The truth is that having any debt means you are financially beholden to a creditor and you can’t put your money in your own pocket until your obligation is met.

Which strategy will ultimately be the best choice for you depends on your own circumstances, and we can’t tell you what to do.

But the option we want to discuss here is paying off debt.

You may have heard that some creditors are willing to settle your debt for pennies on the dollar.

In reality, credit card debt forgiveness is rare and tricky, and can be very costly. Then you have to convince your creditors that you don’t have the means to repay your debt and your situation isn’t likely to change.

If you manage to work out a debt settlement agreement, the creditor is all but guaranteed to report your forgiven debt to the IRS. The amount of tax you owe on the forgiven debt depends on your adjusted gross income and your tax rate.

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