The Debt Settlement Debate - Is Debt Settlement A Legitimate Debt Relief Option?

Online, June 6, 2010 (Newswire.com) - After one of the worst recessions in American history, there are more consumers currently struggling with unsecured debt than at any other time. Bankruptcy filings are increasing everyday however bankruptcy is not nearly as easy or advantageous as it used to be. Many consumers who want to avoid bankruptcy and have at least $10,000 in unsecured debt are opting for debt settlement.

Debt settlement is where consumers stop paying their creditors and instead pay into a savings account until around 50% of the debt balance is saved up. Once around 50% of the balance is saved, a debt settlement negotiator will go in and offer the creditor a debt settlement deal. Since the debtor has not been making consistent payments, the creditor will typically consider them a legitimate candidate for bankruptcy and often accept the debt settlement deal knowing that if the consumer were to file bankruptcy they would likely receive none of their money back.

Recent congressional hearings into the debt settlement industry have fueled the debate of whether or not debt settlement is a legitimate industry. Opponents of debt settlement argue that these services charge front loaded fees and the consumer has no guarantee that the debts will ever be ultimately settled. Debt settlement defenders acknowledge that there are some shady and unethical companies in the industry however to paint the entire industry in a negative light in simply unfair. So is debt settlement a legitimate way for consumers to eliminate unsecured debt?

Debt settlement companies settled over $1 billion in unsecured debts in 2009 alone. This resulted in approximately $400 million being collected for creditors and $600 million being eliminated off the books for debt ridden consumers. This outstanding debt collected by the debt settlement companies would have probably never been collected had the consumer decided to opt for bankruptcy instead. When a debtor opts for bankruptcy, creditors of unsecured debt often receive little to none of their money back. Knowing this, many creditors of unsecured debt including credit card companies are more than willing to take a debt settlement offer and receive 50% of their money rather than none at all.

If a consumer is over $10k in unsecured debt and is currently experiencing a financial hardship then debt settlement can be a viable option to eliminate debt and avoid bankruptcy. As long as they understand the risk and know how to locate a legitimate debt settlement company then debt settlement can make financial sense. Consumers who enter into a debt settlement program must have enough patience to stick with the program for its entire duration, typically 2-4 years, if they want to successfully settle their debts.

To locate legitimate debt settlement companies that have proven themselves in successfully settling consumer debts check out the following link:

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