AAARGH, Debt?!

debt settlement is where you negotiate a settlement with the creditor for less than you actually owe. Example - You owe $7200 on a credit card and ask the creditor to settle for $3000. They may either accept this right then, or come back with a counter-offer, which you can then accept or reject, then come back with another figure yourself. The creditor usually reports the debt as paid - settled for less than balance owed, or something to that effect on your credit report. Some people can offer a settlement and ask the creditor to agree to delete the account from credit reports. Always get the terms of your settlement and the creditors acceptance of it in writing, and also get written confirmation from the creditor that the debt has been satisfied per your settlement terms. The debt settlement company will figure up how much you need to save each month and the will then start negotiating with your creditors for settlements on your accounts when you have enough money to work with. Keep in mind that just because you are working with a debt settlement company, this does not mean that you are protected and cannot be sued. The settlement companies cannot protect you from lawsuits and garnishments. Also, while you are saving funds in a settlement account, your debts are going unpaid and the accounts are being reported unpaid to the credit bureaus, which brings your credit score down. After so many months of not being paid, your creditors will eventually charge off your account as a bad debt (also reported to credit bureaus) and turn it over to a third-party collection agency. Your debt settlement company can intervene by getting the collector to not harass you, but the collector can sue for a judgment or try to have your wages garnished, sometimes a lien against property.... just dependent on what your state laws are.

Debt management/consolidation is when you enroll in a program and the company you work with figures up 1 affordable monthly payment for you. Once you pay it, the debt management company disburses payments to each of your creditors. After you make so many consecutive monthly payments and the creditors get their money, they will in a lot of cases agree to lower your interest rates quite considerably and also waive late/overlimit fees. These payments keep your account current, and is also reported favorably to the credit bureaus.

I would strongly advise you to research any company you are considering using, as there are so many scams going. Check the companies out with the BBB, Google them to see what comes up, etc.