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What Are the Drawbacks to Debt Settlement Programs?

Of course, nothing is perfect, there are problems with debt settlement programs. Often debt settlement information is provided by salespeople who make it sound too good to be true for many people in debt. It needs to be reviewed carefully as it’s not the perfect solution for everybody.

If I tell a person struggling with credit card debt they can reduce what they owe by up to 60% it sounds perfect. “Where do I sign?” would be a likely response (and often is). However, if you are dealing with a reputable and reliable debt settlement company, they will tell you some of the potential negatives to the program as well.

  • Your credit score will suffer
  • Your accounts will be paid off but will not show up on your credit report as “paid in full”
  • The debt settlement company cannot guarantee they will be successful in negotiating your debts down
  • Bottom line is that debt settlement is a bankruptcy alternative for those who need to get out of debt because they are past the point where they can reasonably get out of their financial situation without a more drastic solution.

    While debt settlement is not perfect, it does help a lot of people who need it and allows them to avoid the even worse case scenario of bankruptcy.