The Chicago Sun-Times recently reported on a successful debt settlement story that resulted in the consumer saving $15,150 using an accredited debt settlement provider, New Era Debt Solutions.

Here is an excerpt from the article, titled “Debt manager put to the test” by Terry Savage:

Peter entered the program with $26,700 in debt on one credit card. He initially paid $800 as a retainer fee (of which, $400 was eventually returned to him).

New Era obtained a settlement that required Peter to pay only $7,185 to the card issuer, and an additional $3,605 in settlement fees, plus the $400 reduced deposit.

Peter saved — or, more accurately, avoided paying — $15,510. His credit report will show the debt as “settled for less than full balance.”

His reaction: “What a relief! I was fairly skeptical, and I know you were too,” he told me. “But the beauty of these guys was they didn’t take any money up front. It took them several months but they were right in saying that you have to wait a while to get a good settlement.

The truth is, we in the debt settlement industry see hundreds of satisfied consumers every day, grateful for the service provided and financial burdens lessened. As with any service industry, there are bad actors that can cast a negative light on an entire industry– but USOBA and other accreditation entities advocate for consumer protection and education, urging consumers to do their homework and avoid the debt settlement red flags.

Our nation’s debt is staggering – over $13 trillion and counting – but the level of consumer debt is just as concerning, and is rising each day due to foreclosures, job loss and unexpected expenses. In fact, each American citizen’s share of the national debt is over $42,000 – and that’s on top of the personal debt they’ve already accrued. 

States also have their own debt. According to data collected in the 2008 census, Massachusetts, Alaska and Rhode Island topped the list of most debt-ridden states, based on debt per capita. The three states with the least amount of debt are Tennessee, Georgia and Texas – but today’s numbers reflect that California is the most debt-ridden state, with more than $29 trillion in debt. 

Totaling your personal debt – through credit cards, mortgages and other loans – can seem overwhelming. However, there are many ways for getting out of the red, and into the black.

Whether it’s credit counseling, debt settlement or bankruptcy, there are alternatives to living a life filled with calls from collectors. Seek help from a debt relief professional, and do what you can to take control of your finances. It may take a while – months, even years – but the accomplishment of living a debt-free life, or at least one where finances are controlled and budgets are adhered to, is well worth the effort.

This week, personal finance reporter Sandra Block with USA Today wrote an article on the pros and cons of debt relief, citing the good and bad things about debt settlement, credit counseling and bankruptcy. Here’s an excerpt from the article:

Debt settlement. Debt-settlement companies negotiate with creditors to reduce the amount of debt you owe. You’re typically directed to make monthly payments into a savings account. When a certain amount has been saved, the company will go to your creditors and offer to pay off a percentage of your debt. Debt-settlement companies say they often succeed in reducing their customers’ debts by 50% or more.

Pros: Debt settlement is an alternative to bankruptcy for people who are struggling with large debts from financial setbacks, such as a serious illness or divorce, says Don Goldberg, a spokesman for the Consumer Credit Rights Campaign, a coalition of debt-settlement companies. It allows them to reduce their debts without losing their cars and their homes, he says.

Cons: Some debt-settlement companies charge large, upfront fees that reduce the amount of money available to negotiate with creditors. If you stop paying your bills — which some debt-settlement companies tell their customers to do — interest and penalties will increase the amount you owe. Your creditors could take you to court, and your wages could be garnished. Even if you’re successful, your credit score will take a serious hit.

Where to learn more: Don’t respond to advertisements promising fast relief from your debts. These are often placed by marketers that receive a commission for referring customers to debt-settlement companies. Instead, check out companies that belong to the Association of Settlement Companies or the United States Organizations for Bankruptcy Alternatives. Both are trade groups that require members to adhere to certain standards. Ask for a free consultation, and make sure you understand how much of your payments will go toward fees.

For a complete look at the pros and cons of debt relief options, you can read the full article here.

Aptly-named opportunists are coming out of the woodwork to capitalize on several years of economic and financial pressure many families are facing, promising “easy and painless” debt relief. Unfortunately, these bad actors are plaguing “best-practice” driven debt settlement companies, and consumers trying to avoid bankruptcy are left to try and tell the difference. 

When considering debt settlement, or any debt relief solution, look for the following “red flags” that the company may not be operating with your best interests in mind: 

• Lack of Disclosure. The biggest complaints against the debt settlement industry tend to be against full and responsible disclosure of terms, fees and timelines. (Fact: debt settlement is a service that consumers pay a fee for—those fees should be clearly communicated to you.  Fact: Creditors may put your account into collections once the debt settlement process begins.  Fact: Debt settlement is a process that typically takes between 2-3 years to complete, not a quick fix.)   If the paperwork you receive isn’t clear, or doesn’t cover these basic disclosures, visit www.usoba.org or www.tascsite.org for a list of accredited debt settlement organizations and frequently asked questions.
• Pressure. Debt settlement companies operating under “best practice” guidelines will not pressure you to make a quick decision or sign a contract immediately. Trustworthy debt settlement companies understand that your financial situation is very personal and requires much consideration by you and your family.
• Silence. A good debt settlement company will communicate with you openly and consistently. If you aren’t communicated with steadily regarding the status of your settlement process, you may be dealing with a “bad actor.”
• False Promises. Some of the industry’s most reported “bad actors” have falsely informed consumers that they are signing up for a “federal debt relief program” or the “Obama plan.” No such plan exists today, nor has it ever.
• Unrealistic Expectations. If a debt settlement company tells you that your credit won’t be affected by entering a debt settlement program, that your debt will be eliminated in weeks, or anything else that seems “too good to be true”—it probably is.