The Debt settlement deal typically looks like this: in exchange for a lump-sum payment, the credit card company is supposed to cut the debt by a significant portion. These programs can take anywhere from two to three years to complete.
But in order to pay the creditor a lump sum, the Debt Settlement client has to have enough money placed into their debt settlement account. Which means that they have to stop paying money towards their credit card bills so that they can pay money into the settlement account.
But when the credit card and bill collection companies stop getting paid…well they start to do the things that credit card companies and bill collectors do when you don’t pay your bill: they start calling your house, mailing you nasty letters demanding payment – and may even sue you for the debt.
All of this obviously has a negative impact on your credit score and credit history. While this damage may be corrected over time – debt settlement customers usually never reap the benefits of the program. According to the New York Times article entitled “Peddling Relief Firms Put Debtors Deeper in Hole“
“the [debt settlement] industry’s own figures show that clients typically fail to secure relief. In a survey of its members, the Association of Settlement Companies found that three years after enrolling, only 34 percent of customers had either completed programs or were still saving for settlements.”
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