If a debt settlement company promises certain results, proceed carefully. Debt settlement companies are supposed to follow industry regulations that are designed to protect consumers and their money.Ģ. Most states require that they be licensed. A number of legitimate debt settlement companies operate in the U.S. Here’s what the process looks like when hiring a debt settlement company.ġ. How Debt Settlement Worksĭebt settlement handled by a debt settlement company differs from taking a DIY approach. But you may be able to settle other unsecured debt as well. Normally, debt settlement involves money you owe to credit card issuers, rather than other types of debt. Although, according to some experts, filing for bankruptcy may be the better alternative in some cases. Furthermore, it may mean the borrower can avoid filing for bankruptcy. For the creditor, debt settlement enables them to receive at least some of the money they’re owed rather than no money at all. This sum typically is much less than what you originally owed.įor the borrower, debt settlement can provide financial relief and put them on the path toward rebuilding their credit. Debt settlement, also known as debt negotiation, involves wiping out debt by paying a portion of it in one lump sum.
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