Debt settlement and debt forgiveness are often used interchangeably, but they aren’t the same thing. Knowing the difference can help you understand how each may affect your credit and, in some cases, your taxes.
We spoke with Bruce McClary of the National Foundation for Credit Counseling (NFCC) about how the two differ, what borrowers often overlook and a common misconception about charged-off debt.
Debt settlement vs. debt forgiveness
What is debt settlement?
Debt settlement is the process of negotiating with a creditor or debt collector to accept less than the full amount you owe. You can negotiate yourself or hire a settlement company to do it on your behalf, McClary tells CNBC Select. Once you fulfill the terms of the agreement, the…