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Interesting facts about debt settlement

Credit card debt is a serious problem in South Carolina as well as the rest of the United States. Those whose monthly minimum payments are more than they can afford have some options for lowering their debt, including debt settlement. Debt settlement companies attempt to make arrangements with creditors on behalf of their clients to reduce the principal balance in exchange for a lump-sum payment.

Working with a debt settlement company can sometimes involve serious risks to a client's credit rating. Because the counselors typically advise clients not to make any payments on their bills and to instead send money to an escrow account, creditors may report the delinquencies to credit bureaus. While the bills are not being paid, they may accumulate late fees and interest, making them more costly to pay off. A debt settlement company cannot guarantee it will be able to reach an agreement with any creditor so the added costs may become the responsibility of the credit card holder.

Credit card holders who want to take advantage of debt settlement options should be wary of scams. Companies that promise to settle debts or who charge a fee before they deliver results are likely to cause more problems than they fix. Before contracting with a company to settle debts, card holders might consider credit counseling or even bankruptcy.

A lawyer that focuses on bankruptcy law may explain a client's options and help them decide on the best way to get out of debt. Chapter 13 bankruptcy can often help a person pay off debts in just a few years and creditors are obligated to comply with the court-approved plan. While debt settlement companies cannot stop creditors from filing lawsuits, the automatic stay that goes into effect when a person files bankruptcy prevents creditors from suing their customers for unpaid balances.

Source: FTC, "Settling Credit Card Debt", December 22, 2014

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The Huggins Law Firm, PA

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Columbia, SC 29201

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