When considering your options, the first step is to determine whether you can pay down your debts with your current income.  If you can pay down your debts with your current income (or increase your current income), then debt settlement may be the best solution for you.  Next, you will need to determine whether you qualify for debt settlement.  To qualify for debt settlement, you will usually need to have at least $7,000 in unsecured debt.  It’s very important to ask each debt settlement company that you talk to about the minimum debt balance requirements.  Some companies have higher minimum requirements than others.

Choose debt settlement companies that have a strong history of negotiating with creditors.  Ask for references, and compare the services that each company offers. Check the company’s ratings with the Better Business Bureau.  Avoid debt settlement companies with negative ratings and lots of complaints.  If you decide to move forward with debt settlement, be prepared for the potential negatives.  Some potential negatives include: increased creditor phone calls, damaged credit, and possible collection lawsuits from creditors.  If you can’t handle these possibilities, then debt settlement probably isn’t the best choice for you.  Similarly, if you can’t pay off your current debt with your current income, then bankruptcy may be a better choice for you.

When considering bankruptcy, determine whether it will resolve your credit problems.  Depending on the amount and type of debt you have, a bankruptcy won’t always erase your responsibility to pay creditors.  From a cost standpoint, bankruptcy is usually more expensive than debt settlement.  And of course, bankruptcy is the darkest mark you can have on your credit score.  Compared to bankruptcy, debt settlement doesn’t affect your score to the same extent.  Talk with your attorney to determine whether bankruptcy or debt settlement is the right solution for you.

To begin with, there are a number of unscrupulous debt settlement firms.  Some debt settlement firms are deceptive and unethical – while others are outright scams.  Hiring a licensed, experienced attorney can protect you (and your credit) from deceptive companies that take advantage of debtors.  Unlike attorneys, debt settlement companies are not required to be licensed.  This means that anyone can open a debt settlement company, and there is no monitoring or oversight.

Attorneys are also more familiar with the law, as it applies to debt settlement, consumer rights, and legal negotiation.  In comparison, most debt settlement companies are not very familiar with the laws that govern consumer debt, collections, and creditors’ claims.  A bankruptcy attorney is also more knowledgeable about legal guidelines and consumer regulations regarding secured and unsecured debt.

Another reason to hire an attorney is because they are typically better at negotiation, compared to debt settlement firms. Attorneys earn a living by persuading and negotiating – this may include persuading judges, vendors, juries, and clients, among many other groups of people.  As a result, attorneys have developed good persuasion, communication, and negotiation skills.  These skills will be put to good use when settling your debt.  Compared to debt settlement companies, attorneys are also more respected (and feared).  Creditors are more likely to comply with an attorney than with a generic debt settlement company.  Depending on a number of different factors, an attorney can usually reduce your total debt owed by 30-60 percent (sometimes more). Before using a debt settlement company, consider hiring an attorney instead.  Talk to an experienced debt settlement attorney in your area to learn more.

One of the most appealing features of consolidation loans is their convenience.  With a consolidation loan, you will be paying one single lender – instead of many different lenders each month.  Plus, you will be paying a single interest rate – instead of 10 (or more) different interest rates from various lenders. There are several types of debt consolidation loans including home equity lines, cash out refinancing, and a personal debt consolidation loan.  Personal debt consolidation loans are a good choice if you don’t own a home, or you have no equity in your home.  The interest rates on personal debt consolidation loans are higher than home equity loans, but typically lower than credit card rates.

If you’re considering debt consolidation, it’s important to understand what debt consolidation companies don’t tell you.  Many people don’t realize that debt consolidation companies often charge high fees.  The fees charged will vary depending on the amount of your debts and the debt consolidation company you’re using.  Typically, if you’ve acquired so much debt that you’re looking for a consolidation loan, the interest rates will be very high.  You may not qualify for the low interest rates you see advertised.  Companies who offer debt consolidation loans offer the very best interest rates to consumers with high credit scores.

If you’re in too much debt, chances are good that your credit score is suffering.  Depending on your financial circumstances, pursuing a home equity line of credit (or personal loan) may be a better choice.  Before you agree to a consolidation loan, be sure that the costs of the new consolidated loan are less than what you’re already paying across multiple creditors.

Debt consolidation loans can be a good idea if you’ve run out of available options and you’d like to avoid filing for bankruptcy.  Be sure to consider all the risks, and shop among different lenders to get the best rate and terms.

Sadly, many debt collection agents do not follow the law, and can become threatening and abusive towards borrowers.  Aside from demanding payment, there is very little that debt collectors can do.  If you’ve pledged your car, house, or other physical property as collateral for a loan (secured debt), then the collection agency can seize the property that was pledged as collateral.  However, if you owe unsecured debt, the creditor is limited to three options.

First, if you fail to pay the debt, the creditor can stop doing business with you.  Second, the creditor can report your default to the credit bureau.  Third, the creditor can sue you in court.  Luckily, most creditors do not act on their threats to sue you.  However, if you are sued, you can settle the court case by paying the debt.  If the creditor obtains a judgment against you, the judgment does not force you to pay the debt.  What the judgment does is give the creditor the right to seize part of your property or income.

One of the best ways to stop debt collection harassment is to prevent abuse before it starts.  If you’re behind on payments, call the creditor and explain your situation.  Determine whether you actually owe the money, or if you have a defense that could eliminate your debt (either all of the debt, or part of it).  Try negotiating with your creditor or the collection agency.  Working out a compromise repayment plan can often stop debt collection harassment.

Another good way to stop debt collection harassment is to write a cease-and-desist letter. According to federal law, collection agencies must stop their collection attempts after they receive a written request to stop.  Unfortunately, this law does not apply to creditors who are collecting their own debts.  However, often creditors will stop contacting you if you send them a cease-and-desist letter.  If you decide to send a cease-and-desist letter, be sure to keep a copy of the written letter for your records.

It’s also a good idea to mail the letter using certified mail, with return receipt requested.  This will serve as proof that the debt collection agency (or creditor) actually received your letter.  If writing a cease-and-desist letter does not stop debt collection harassment, consider having your attorney send a letter to the collection agency.  Your lawyer can usually convince the debt collection agencies to stop harassing behavior.  He may also be able to raise legal claims against the debt collection agency if they are violating debt collection harassment laws.