Credit Card Debt Settlement - Why Credit Card Companies Are Making Debt Settlement Deals

Online, September 26, 2010 (Newswire.com) - One of the biggest issues facing the American consumer is credit card debt. Coming off one of the worst recessions in American history, there are more consumers on the verge of bankruptcy than ever before. Credit card debt balances are rising out of control and many consumers are struggling to meet the minimum payments. In order to avoid bankruptcy, credit card companies and other creditors of unsecured debt are engaging in a process called credit card debt settlement .

When a consumer files for Ch. 7 bankruptcy, typically their unsecured debt is completely forgiven. This means that the creditor takes a complete loss. Credit card companies and other creditors of unsecured debt know this and are looking for other ways to collect their money. One of these collection tactics is known as credit card debt settlement.

With the debt settlement process, creditors are usually able to collect around 50% of their money back which is better than nothing. This means that consumers are able to eliminate around 50% of their balance however it does not come without consequence. Credit scores will be negatively affected any time a debt is settled for less than the actual amount. While your credit score will be negatively affected in the short term it is not nearly as severe as filing bankruptcy.

Filing bankruptcy will affect a credit rating for at least 7 years after the process is complete. Considering the average bankruptcy case takes around 2-3 years, consumers will have their credit scores negatively affected for at least 10 years in total. Many consumers who enter into a debt settlement program can restore their credit in around 2-3 years after the process is complete. This is why financial experts say that bankruptcy should always be your last option for debt relief.

Credit card debt settlement used to be a very risky decision for consumers seeking debt relief. However on July 28th 2010 new laws were passed by the FTC which made debt settlement a much more legitimate option for consumers and small businesses. These laws effectively ban debt settlement companies from collecting upfront fees. Now consumers don't have to pay a dime until their debts actually settle. This indeed makes the process more legitimate and a far less risky option for credit card debt relief.

Credit card debt settlement is a legitimate alternative to filing bankruptcy. If a consumer has over $10k in unsecured debt and is currently experiencing a financial hardship then debt settlement can make financial sense. To find legitimate debt settlement programs that have proven track records of settling consumer debts then check out the following link:

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