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Sally is able to save $27,000 through debt settlement How much to pay for settlement Under the new FTC Rule in 2010, settlement companies cannot charge an upfront fee for their services until: The debt settlement company has successfully negotiated, settled or reduced at least one of the debts you owe. There is a written settlement agreement between you and your creditor. You have made at least a single payment to your creditor under the agreement negotiated by the settlement company. Under the Debt Settlement Consumer Protection Act enforced by the State of Illinois, the upfront fee is capped at $50 and the total fees shouldn't exceed 15% of what you save under a settlement program. There is no such cap introduced in any other state as of now. The fees you pay under a settlement program depend on: How much you owe The number of debt accounts you have How much you save by settling bills How long it takes to settle debts It usually takes 2-4 years to complete a settlement program. How long it takes depends on your total debt amount. Creditor suits after settlement

Once you negotiate debt settlements with your creditors/collection agencies, your creditors may be able to come after you for the original balance of your debt, depending on your state's law. In any state, if you default on the settlement agreement, you can be sued to collect the settlement amount. So it is very important that once you get a settlement agreement, you keep paying your bills!^Top How to choose best debt settlement company In order to find the best debt settlement companies in USA, you need to check out the following: Company profile: You need to check the profile and service background of the debt settlement companies you are considering and choose the one that suits you the best. Company accreditations: These include the certifications that the settlement companies have obtained so far, such as their Better Business Bureau report. There are other accreditations available for businesses, such as TASC, IAPDA certification etc. Program fees and costs: You need to find out what debt settlement companies charge. Compare their fees and choose the best companies you can deal with. Client testimonials: Look for testimonials and feedback given by past debtors. You can also ask your friends and associates about reputable debt settlement companies they have dealt with.^Top Pros and cons of debt settlement Whether you go for credit card debt settlement program or you settle personal loans, payday loans etc, here are the debt settlement pros and cons that you should be aware of. Pros: Avoid bankruptcy: With debt settlement solutions, you can resolve your debt problems and don't have to worry about losing your home or car as in Chapter 7 bankruptcy. Single payment: Instead of paying multiple bills each month, you'll only have to make a single monthly payment to the settlement company. You avoid the stress of paying debts at different rates and dealing with several creditors. Avoid unfair collection practices: You can avoid unfair collection practices and harassment by debt collectors if you negotiate a settlement. Eliminate extra charges: The debt settlement help company can eliminate late fees and any over-the-limit fees on credit cards. Avoid lawsuit & other legal actions: Your creditors or the collection agencies can file suit to get a judgment lien and garnish your wages. You will be able to avoid collection suits if your debt settlement program is successful. Cons: Credit score drops: In a settlement program, you're asked to stop paying your creditors until you save enough to make a lump sum settlement. Moreover, you may settle your bills only after your accounts are charged off. Due to late payment or charge-offs, your credit score takes a hit. You may owe taxes: Once you go for credit card settlement or settle other debts, creditors will forgive a percentage of what you owe. As such, the IRS will require you to pay taxes on this forgiven debt which is known as cancellation-of-debt (COD) income. Account status on credit report: Unless negotiated with creditors or CA, the account status on your credit report will be updated as "Settled" which creates a negative impact on your score as compared to a "Paid in full" status. Debt settlement programs provide an easy way out of debt. However, your credit score is likely to go down when you stop paying creditors and save money for debt settlement. But you can repair your score by using a secured credit card, or a gas/store card. Such cards are easily available even though you may have a poor credit history. Besides, you need to make timely payments on other bills while you settle credit cards and other dues using debt settlement services.^Top Just in case you don't want to enroll with an online debt settlement company, you can do it yourself.debt relief Usesample debt settlement letters to communicate with creditors and collection agencies. Just make sure you understand how the process works and negotiate as best you can.