Debt Settlement: A Risky Option

As bogus credit counselors have been shut down, a new breed of firms promising debt deliverance has taken over airwaves and the Internet. They essentially promise to settle your debts for pennies on the dollar.

Although the schemes vary somewhat, the basic idea is that you stop paying your bills and instead save up the cash that the firm will then use to negotiate a settlement of your debts. Failing to pay your bills on time will, of course, trash your credit scores, and settlements, especially with your original creditors, can do additional damage.

The worst of these firms make unrealistic promises, assure you your credit won’t be harmed, and disappear after taking thousands of your dollars. Even working with a legitimate firm can lead to lawsuits and wage garnishment as creditors retaliate.