Debt Settlement Assistance

Between mortgage payments, car loan payments, credit card debt and monthly bills, some Americans are finding themselves falling deeper into debt. Some may be in so deep that they do not see a way out. But maybe you saw an ad on television one night promoting the benefits of debt settlement. It may be the only way for you to see some light at the end of the tunnel.

Last Resort

A debt settlement should be viewed as a last resort before filing for bankruptcy. You will suffer a significant dent on your credit report, but not as big and long-lasting as a bankruptcy filing, which can stay on your report for 10 years. If bankruptcy is looming, creditors may be willing to negotiate a settlement in order to guarantee the return of some money -- it's unlikely they would see much, if any, via bankruptcy.

Stopping Payments

Before starting the debt settlement process, debt settlement companies will advise you to stop payments on your bills, advises the National Foundation for Credit Counseling. Creditors will usually ignore your requests for a settlement unless you are at least three or even six months behind. The risk you are taking here is that your credit report will be negatively affected because of late payments -- a component that makes up 35 percent of your credit score. Furthermore, creditors are not required to settle or even negotiate your outstanding balance with you.

Settlement Process

You can settle directly with your creditors or contact a debt settlement agency to help you. Once your creditors agree to work toward a settlement, you enter a negotiation period. It can take about six months to reach a settlement if you are working with an agency, which will notify you when it feels a fair settlement can be reached.

Complaints

Debt settlement companies have become a lightning rod of controversy, sparking numerous complaints. One of the complaints is about fees. You will have to pay a percentage of your debt to the company, plus monthly fees. Some may charge you a percentage of the money you saved with the settlement. Other complaints include stealing money and poor service. Check with the Better Business Bureau to find a company with a good record.