Credit card debt settlement programs used to be a very risky and desperate option to get out of credit card debt. No longer. New federal laws, recently passed on October 27, 2010, have severely regulated debt regulation companies and made them a much better option for consumers and small businesses seeking debt relief.
Now, these debt settlement companies can not advance their fees. You must negotiate a successful settlement and eliminate at least 35% of your unsecured debt to charge a fee. So, if you have a $ 30,000 credit card balance, you’ll need to remove at least $ 10,500 to charge a fee.
By making the debt relief industry a performance-based service, consumers were able to reduce their debt much better. The risk was significantly reduced by these new federal laws. In the past, you had to pay your fee in advance and keep your fingers crossed in the hope that your debts will be eliminated. If your debt does not settle down with these new laws, you do not have to pay for their efforts.
Debt settlement is seen as a legitimate alternative to bankruptcy, but only those who are about to go bankrupt should consider such an option. A settlement is still detrimental to your creditworthiness, but is not nearly as bad as a bankruptcy. Bankruptcy charges your balance for at least 7 years, while a settlement program can usually repair your balance within 3 years. Ultimately, consumers who participate in a billing program opt for eliminating their unsecured debts rather than achieving a truly high credit score.