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Roughly 80 percent of Americans carry some form of debt among mortgages, auto payments, student loans, medical bills and credit cards. However, credit card debts are by far the most damaging type. Per NerdWallet, Americans owe a collection $927 billion in debt, with the average household carrying debt holding a balance over $15,000. For some debtors, progress might be slow because of other life wants being prioritized. For others, high interest rates have buried their financial freedom.

If you’re experiencing the latter, you might be exploring debt relief solutions. Let’s examine whether one popular route—debt settlement—is a wise idea.

What Does Debt Settlement Entail?

When you’ve fallen so far behind on your debt that following popular repayment plans are useless, more aggressive debt relief strategies become necessary. Debt settlement involves a debtor or a third-party company negotiating with creditors to lower debt sums. When debtors work with a debt settlement company, they save up monthly payments into an account. Eventually, when these savings reach a decent amount, the company offers the creditor the lump sum to absolve the debt amount. When debt settlement companies are successful in lowering a debt, and the debtor agrees to pay it, a fee of anywhere from 15–25 percent is charged based on the original debt amount.

Which Debt Relief Companies Are Legitimate?

Unfortunately, no matter how many debtors debt relief companies help, scammers will still look to prey on the emotional state of those in deep debt. To cut through the noise and find a legitimate partner, research companies through a variety of touchpoints.

Review sites Consumer Affairs or TrustPilot check the company’s website to see how much info they divulge (transparency is essential!) and even monitor their social profiles to gauge their activity level and quality of information they provide. For example, providers like Freedom Debt Relief regularly post top financial tips related to getting out of debt, dealing with financial stress and other relevant advice on their Facebook page. It also helps to contact each company personally and observe their willingness to learn about your situation and how you need help versus try to sell you products.

Disadvantages of Debt Settlement

The prospect of having your debt settled for substantially reduced rates is tough to ignore if you’re sinking in debt without a clear path out. However, like all severe measures, debt settlement carries drawbacks. It’ll stay on your credit score for seven years and take anywhere from two to four years to resolve. During this time, you’ll likely continue to receive creditor calls and collection mail as you won’t be paying your debts to gain leverage in the negotiation process. If the debt settlement company is successful in lowering your debt, you’ll have to pay a fee based on the percentage, which might not financially make sense depending on the amount of debt you have. Finally, the IRS views forgiven debt as income, so you’ll be liable for a tax bill on any settled debt amount.

Alternative Debt Settlement Strategies

Aside from asking family members for money or possibly getting a balance transfer or debt consolidation loan if your credit is still decent, bankruptcy, either by chapter 7 or 13, is the equivalent to debt settlement. Like debt settlement, bankruptcy will stay on credit reports for seven (chapter 13) to 10 years (chapter 7). If you declare chapter 7, you could also see a lot of your possessions liquidated to pay back your debts. On top of this, you’ll have to pay attorney fees, court costs, and take mandatory financial management courses.

There’s no one way to go about solving debt, but when your back is against the wall, debt settlement can prove to be as effective an option as any. Be sure to consider your specific financial situation and explore all possible options before committing to an action plan.