Debt settlement is catching up as a popular method to get rid of your debt if you owe a lot of accumulated unsecured debt.
It is the right option for you if you are facing financial hardship and have difficulty in making your minimum monthly payments.
The reason why people hesitate to go in for asettlement as opposed to methods like debt consolidation or credit counseling is because it has a major negative impact on your credit rating in the short term.
However, for a person who is neck deep in debt and on the brink of a bankruptcy, the priority should be to eliminate the debt at the earliest even if the credit score takes a beating in the process.
Debt settlement can help you to save up to 50% of your original debt balance through systematic negotiations that can be repaid in affordable installments.
This leaves you with money to spend on necessary expenses and monthly bills.
Most consumers take the help of settlement companies to help them with the process of negotiating a settlement with their creditors and some of them have had bitter experiences with thesettlement companies conning them out of the little money that they had and forcing them to file for bankruptcy as a last resort.
However, as a result of the new laws passed by the FTC in October 2010, it is now much easier for consumers to legally eliminate credit card debt.
The new laws focused on for- profit debt settlement companies, prohibiting them from collecting upfront fees from clients looking to settle their unsecured credit card debt.
IT also states that if the settlement company requires the debtor to maintain an escrow account, it would need to be owned and maintained by the debtor personally and not by the debt settlement company.
Consequently, the settlement process has become much more legitimate and a far less risky option for consumers.