If you're struggling with debt and looking for a solution, you may be considering working with a debt settlement company. These companies claim to negotiate with your creditors to get them to agree to a lower payoff amount or to forgive the debt completely.
However, letting one of these companies handle your debt can be a risky proposition. Often, the company will instruct the client to stop paying their creditors and to pay it instead while it handles the negotiations. The idea is that the debt settlement company will use those funds to pay off the negotiated balance and to pay itself -- either by taking a monthly fee or a percentage of your debt.
However, these negotiations with creditors aren't always successful. In fact, in many cases, they aren't. Meanwhile, the debt settlement client has stopped making payments to their creditors and destroyed their credit score.
Even if some debts are settled, those settlements are reflected on your credit report. They're often viewed negatively by potential creditors.
There are better options, including working with creditors yourself to negotiate a repayment plan you can manage. Sometimes a debt consolidation loan, if you can get a lower interest rate than what you have with your creditors, can be a good alternative. Credit counseling agencies can help you work out a debt management plan (DMP). This shouldn't be confused with a debt settlement plan.
Depending on your situation, bankruptcy might be the best solution in the long run. It's important to do some research into the pros and cons of each of these options and determine which is best for you.