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Is credit card debt settlement a good idea?

Many people in Louisiana are struggling with excessive amounts of credit card debt. They may have difficulty meeting their payment obligations on a monthly basis, racking up late fees and other additional expenses. When accounts begin to head toward default, creditors may agree to settle the debt for less than the full amount owed, especially when it comes to the amounts garnered through fees and interest charges. While debt settlement can be an attractive option for people to handle some of their debts, it may not always be the best choice.

A debt settlement is essentially a negotiation in which a lower amount is accepted in lieu of the full amount of the credit card debt. While people can handle this kind of negotiation on their own, many people think that going through a debt settlement company is necessary. In this case, the company negotiates with multiple creditors; the client pays the company each month, which it distributes among the creditors. Settlement companies also charge fees of their own, which can amount to 15 to 25 percent of the total debt. In other cases, people may stop making payments, which could have an adverse effect on their credit score.

Debt settlement is usually accompanied by a falling credit score, even if people were already facing difficulties with late or unmade payments. The fact that a settlement was reached can remain on a credit report for up to seven years like other adverse incidents.

Many people opt for debt settlement programs because they want to avoid personal bankruptcy. However, in some cases, filing for bankruptcy might actually be a better option depending on the person's financial circumstances and overall debt load. A bankruptcy lawyer may work with people struggling with credit card debt to move toward debt relief and a new financial future.

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