PROS
You can pay off your debt for less than you owe. This can be anywhere from 40 to 60%.
You can be completely free of debt in 2 years or less.
You can avoid bankruptcy which will have a negative, long-term effect on your credit report.
You can do it on your own. Yes, there are companies out there that can help you but they are not necessary. Please read Choosing a Debt Settlement Company if you plan on hiring an outside company to help you.
CONS
Your credit score will be negatively impacted. Anything other than paying your bills on time will have a negative affect on your credit score. However, many are already behind on their payments and have negative marks on their credit report, so this may not be a concern.You must stop paying your creditors. This can be frightening thing for someone who has been current on their accounts. Debt Settlement is designed for this already in financial trouble.
Late fees and interest charges will not stop. You may have stopped paying, but the creditor will continue to charge you interest and late fees. If your cards are maxed, you could be hit with over-limit fees. Many settlements can include having these charges waived, but keep in mind that this will add to your overall debt total.
You will get calls from your creditors. This is unavoidable. Once you get behind on your payments, the calls will start. Never ignore these calls. Explain your situation or refer them to your debt settlement company. They will get aggressive and push you to pay them something. Be prepared for this.
You will pay taxes on the savings. Any debt forgiven over $600 is considered income by the IRS and the creditor will send you a 1099-C.
It's better to have a few negative marks on your credit than to have a bankruptcy. Plus if you end up paying the debt back companies will usually remove the mark. I think debt settlement is a legitimate option that can really help people.
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