Debt Settlement - The Best Bankruptcy Alternative? By Matthew Taylor At Isnare.com Ezine Articles

Debt settlement is the process in which a company will negotiate on your behalf an amount less then the balanced owed to your creditors. Typically a good settlement company can get the total balance you owe down to about 50 percent, sometimes even less. For most people facing financial crises, that is exactly the break they need.

Today, more then ever debtors need a break from debt. The two most common methods are bankruptcy and debt settlement. Most people already know bankruptcy is the last possible resort you want to do, which leaves debt settlement.

The question is; does debt settlement actually work?

Without a doubt yes, settlement sometimes referred to as debt negotiation does work. The bigger question should be, is it right for you? Before we get into evaluating whether or not it's right for you, let's make sure you understand the process.

Debt settlement has swelled dramatically in it's popularity for debtors looking to resolve their debt situation. This has increasingly being the case since the bankruptcy laws were changed in 2005 making it much harder for consumers to take that option.

For example; if you're currently struggling on your debts, no doubt you're getting hammered with creditor phone calls. Debt settlement companies will also deflect most of that as well by dealing with your creditors on your behalf. Furthermore, if you're $90,000 in debt and making payments of about $1500.00 per month, that may be reduced to about $90,000 and 700.00 per month.

So, let's take a look at the downside of debt settlement and see if it's right for you. We already know it will relieve you of a major portion of your debt but it has its drawbacks.

Two of the drawbacks are costs of the program and damage to your credit report. The average debt settlement company will charge 15 percent or more of the total debt in fees. Their services are invaluable to most people and worth a fee. Keep in mind that generally the more they charge you the more they should be saving you.

Another drawback to debt settlement is the damage to your credit report. While you are in debt settlement, your credit is going to take a beating and don't let anybody tell you otherwise. Chances are if you're considering debt settlement or bankruptcy, your credit is already taking that beating, but if you've managed to keep your credit intact to this point and know you may want to buy a home in the next year, then debt settlement may not be the right choice for you.

After you're finished with settlement then with a focused plan you can be good as new in 6 to 12 months. While there is no replacement for good judgment and making your payments on time, debt settlement has helped hundreds of thousands of debtors get back on their feet. You just have to know if it's the correct solution for you.

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