Credit Card Debt Settlement

As an increasing number of people struggle to pay their bills, debt settlement companies are thriving. You can find their ads promising to settle your debts for pennies on the dollar anywhere.

If you’re drowning in debt, those ads can be pretty attractive. But are they for real? And how will settlement affect your credit rating?

Debt settlement is controversial. In fact, the Federal Trade Commission held an all day conference in late 2008 to discuss the industry. Here’s a basic guide to debt settlement, with tips to help you figure out if it makes sense for you.

What Is Debt Settlement?
Debt settlement is also known as “debt negotiation.” It’s also sometimes referred to as debt consolidation, but that’s misleading since your debt is not consolidated in any way. Settlement programs have been around for many years, but the industry has been exploding recently as consumers find themselves deeper and deeper in to debt.

With debt settlement, you negotiate to pay back a portion of what you owe, usually in a lump sum payment, to resolve a debt that you simply can’t pay back in full. While some ads may tout repayments of as little as ten cents on the dollar, a more typical settlement is somewhere around fifty percent of the amount owed.