Would enrolling into a debt settlement program put me at risk for Bankruptcy?

The process of settling on a debt involves negotiating a lower payoff amount to resolve the outstanding debt owed to a creditor.  Debt settlement should normally not be considered an option if the debt is still held by the original creditor.  If you are in this situation, and unable to bring the account to current status, you should seek the assistance of a certified credit counselor in order to discuss options for restoring your account to current status.  Credit counseling is a process that can help you improve credit and eliminate debt.  In a credit card debt settlement program, negotiators work on your behalf to settle your balances for less than you owe.  In a credit-counseling program, counselors work on your behalf to reduce interest rates.  Credit card settlement programs last between one to five years, while credit counseling services last between four to six years.

There are some benefits to debt settlement.  You can satisfy a debt in full while paying less than the full amount.  The dark side to debt settlement is that companies charge substantial up-front fees, often charge monthly fees and send nothing to your creditors until you have accumulated enough to settle.  Debt settlement should only be considered if your accounts have been charged off and collectors are hounding you.  Look for companies endorsed by the Better Business Bureau.

Filing for bankruptcy won’t necessarily rid you of your duty to pay some of your bills.  Keep in mind that a bankruptcy filing remains on your credit record for ten years, while a bad debt is only supposed to stay on your credit report for seven years.

It’s better to try solving your own financial issues before resorting to a settlement program that may likely damage your credit history.  First try negotiating with your creditors.  It’s never a good idea to stop making your credit card payments, regardless of your financial situation.