So your credit cards are maxed out and you're up to your neck in debt, and you're looking for someone or something to come and tell you what to do. The prevalence of heavy debt has caused more debt-settlement firms to pop up in the US than ever before, and people turning to these services are coming out even more in the red than when they went in. To read about what the deal is with these often shady enterprises just
Some debt-settlement firms have been known to work like this: debt-ridden clients send them monthly payments, the firm holds the payments as a bargaining tool when they try to negotiate a payout with lenders, and the money just sits in the hands of the firm instead of being used toward the client's bills. If the lending banks aren't agreeable to negotiation and won't settle for a lump-sum payout, the already maxed out client is burdened with late fees and higher interest rates since their credit card payment money was going to the debt-settlement firm instead of towards their actual debt. Not to mention the exorbitant fees that debt-settlement firms charge for their negotiation services (fees can run as high as 30% of a client's debt balance).
While the debt-settlement industry defends itself and says that there are far more satisfied customers than not, seven states feel much differently and have banned the services because of their exploitive behavior. An alternative is credit-counseling which works differently than debt-settlement firms — they build monthly payment plans and strive to get consumers lower interest rates. Also, credit-counseling agencies have a higher success rate than the alternative.
If you've developed massive debt and have nowhere to turn, be sure to choose who you let handle your debt wisely. Debt is an emotional thing so be sure to weigh your options carefully without choosing the first company you see in the phone book, or the one who promises you miracles.