Many clients who come to me to discuss their bankruptcy options have previously tried other means of resolving their overwhelming debt issues. Most often these clients have attempted to work with a debt settlement company. Debt settlement is a process which attempts to get the credit card companies to accept less than 100% of what they are owed on a credit card debt. Ordinarily, the credit card companies are only willing to offer a discount if the credit card payments are seriously (many months) delinquent. They generally insist on receiving the full amount of the settlement within one to three months. This makes it very difficult for people to settle credit cards on their own, because they have to accumulate a fairly large amount of money to have available as a settlement funds. The debt settlement companies deal with this by insisting as part of your contract with them that you pay them a hefty amount each month to eventually build a settlement fund.  Typically, however, the first $3,500 they receive from you is applied to their fee. Only then does your “settlement fund” start to build. Problems with the debt settlement alternative include the following:

I should caution that because of the nature of my practice, I rarely see success stories with debt settlement alternatives. That doesn’t mean they don’t exist and the purpose of this post is not to dissuade you from checking into the debt settlement alternative. However, just like everything else, you should proceed cautiously – ask a lot of questions, insist on getting everything in writing, read the fine print, and be comfortable with the refund policy if things get ugly. Most importantly be sure that you are dealing with a reputable company – remember – just because they advertise on the radio or television does not guarantee that they are legitimate.