Settlement isn't free
Forgiven debt over $600 is taxable income. A 50% settlement on $15k means you owe tax on $7,500 as ordinary income. Credit drops 100+ points and the settlement tag stays 7 years.
Debt Settlement vs Payoff
Compare settling for less versus paying in full — true cost and credit impact.
Results
Cheaper option
Settlement
Settlement cost (incl. tax)
$9,150.00
Full payoff total
$20,622.84
Credit hit
~100+ pts, 7 yrs
Frequently asked questions
1.Do settlement companies work?
They usually charge 15–25% of settled debt and require you to stop paying first — which tanks credit and triggers lawsuits. DIY settlement is cheaper if you have the discipline.
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