Can debt relief and forgiveness from creditors fix finances?

When considering whether to file for bankruptcy, it is not unusual for someone to hear advice about contacting creditors in an effort to have debts lowered or forgiven. But is debt relief and forgiveness a myth, or can indebted Connecticut residents really get their amounts owing reduced by a credit card company? The truth is that debt forgiveness can happen, depending on the lender, but it often comes with some strings attached.

It is true that debt collectors are occasionally willing to negotiate on amounts owing, especially when it comes to interest accrued. This is often done as a reward of sorts for committing to a payment plan. However, taxes associated with “forgiven” debt will likely still need to be paid, so the deal may not be as good as one would originally think.

The best way to negotiate with a creditor is to make contact early on, as soon as the inability to pay becomes evident. While this may not result in debt forgiveness, a temporary reprieve from interest may be offered. This can help individuals who are in a temporary bind, but may not be enough for someone with a serious debt issue to address.

For those who are deeper in debt, professional help may be the best avenue for debt relief. A credit counselor, for example, can review debts and help to inform someone what their options might be. However, it is important to find someone accredited and to avoid sketchy debt settlement companies. Those in Connecticut who are considering bankruptcy should speak directly to a lawyer to understand how the filing process works under federal and Connecticut applicable laws.