The debt settlement company will direct you to stop paying your creditor and instead send the money directly to them each month. The company's goal is to demonstrate to your creditor that you don't have the money to pay up - that's your leverage. After a few months, the company will typically go to the creditor and say, "I'm holding X dollars on behalf of your customer. He doesn't have the money to pay you, so you should take this amount as a settlement or you'll end up with nothing." If the creditor wants to get paid badly enough, it will take the money.
Jean ChatzkyYou'll get much better results by being upfront, answering creditors calls, and responding to their letters. Delaying the inevitable only digs a deeper hole.
Jean ChatzkyIf you are able to settle, you'll be getting off rather easy. Debt settlement companies can sometimes get you off the hook for a large percentage of your debt - in many cases, up to 50% will be written off.
Jean ChatzkySave for your goals. Take note of what's coming your way - vacations, the holidays, what ever is going to cost you money - and start saving ahead of time so that you have a stash when the time comes.
Jean Chatzky