Castle Law Office Blog | Missouri & Illinois Bankruptcy Legal Blog

The Truth about Debt Settlement Is Out

While I’ve written several articles on the downsides to debt settlement, it wasn’t clear that the rest of the world was on board. After all, debt settlement does sound really great. And, in this economy, every solution to debt problems is sounding a little bit better. The internal filters we usually have when we hear commercials that promise outrageous things like settling your debt for “pennies on the dollar” don’t work as well as they used to. We just can’t be as cynical as we once were.

Fortunately, the king of financial papers, the Wall Street Journal, is announcing the truth about debt settlement, too. The article reads, “But the television and radio ads that blare ‘pay just 50% of what you owe,’ too often neglect the fine print noting that debt settlement—which entails deliberately failing to pay your bills until you reach an agreement with your creditor to pay only a portion of the total owed—works only for a few consumers who attempt it.”

The article continues on about the disappointment you can face even if you can get a debt settlement firm to help you. It seems to me, and apparently the Wall Street Journal, that debt settlement just isn’t the best way to keep your family from foreclosure, harassing creditor calls, and the other bad stuff that comes with too much debt.

So, what is the best option? Everyone’s situation is different and it is often hard to tell which method of relieving debt will work the best. Certainly, bankruptcy is among the safest options. And it is federal law, so it is a very powerful option allowing you to control the terms of repayment, if any, and not the lender, as in the case of debt settlement. While debt settlement promises to settle your debt for “pennies on the dollar,” a chapter 7 bankruptcy in most cases can actually eliminate most of your debt completely. In addition, it takes care of all of that other bad stuff; it stops creditors from harassing you, removes wage garnishments, and gets you on your way to a fresh start. Of course, the decision is up to you but you’d be well-advised to get all the information you can before jumping into any “quick fixes.”