Debt settlement is a way to manage your debt burden caused by extreme financial hardships due to loss of job, medical emergencies and out of control unsecured credit card debt. Debt settlement is one of the better ways to solve financial issued instead of filing for bankruptcy.  Bankruptcy is a very serious situation and has serious financial consequences.

Though the consumer can try to work with creditors to negotiate on they own most consumer use a third party, debt settlement companies. Most creditors will work with a debt settlement company to ensure receiving at least some monies from the consumer verses the consumer filing bankruptcy and not receiving any monies. 

When selecting a debt settlement company, the consumer should confirm information about the company:

·         Ask for a copy of the contract in advance to review

·         Length of time in business

·         Who is handling my account

·         History of the company

Remember, any debt settlement company that tells the consumer it can reduce its debts within weeks or wipe away the credit instantly. The consumer should avoid this type of company.  It may take a minimum of 12 months to negotiate that first settlement and up to 48 months based upon the outstanding balances owed by the consumer to the creditors.

A debt settlement company should explain to the satisfaction of the consumer all the steps involved in the program.  Here are a few of the steps:

• Start to deposit an agreed upon dollar amount into a established “trust account” each month for a certain period of time
• Once enough funds are in the account, the settlement company will negotiate with the creditors on your behalf.  Normally working on the lowest outstanding balance first and working they way up to the larger creditors.
• This negotiation agreement with the creditors can be from 50 to 60% of the outstanding balances and any additional fees
• Discuss fully with experienced staff on the extend of your debt