Debt Settlement

The most aggressive approach to eliminating debt is debt settlement, or as it is more properly known, debt negotiation. In this program, you stop making payments on your debts, and begin paying the money into a debt settlement account. The debt settlement company will attempt to negotiate your creditors into accepting these partial payments.

Does this work?

Usually. While the creditor can simply sue the debtor to collect their fees, this is normally an idle threat, as it is a costly way to collect their money. In addition, since you have paid the money into the debt settlement account, suing you is even less productive because you don't have the money to pay. This program often results in you making the lowest monthly AND overall payments compared to other debt consolidation options.

Lowest Payments, What's the Drawback

Because your debts are "settled," they will be listed as "settled-in-full" instead of "paid-in-full." This blemish sits on your credit report for a number of years, hurting your credit score. However, in time these drop off, they blemish you less than bankruptcy, and you will have more of your money than other programs your credit counselor will recommend.