Can Consumer Debt Settlement Really Make You Debt Free In 36 Months?

Many consumer debt settlement companies make the claim (not a guarantee though) that their debt elimination system can get you out of debt in 36 months or less. But can they? Let's look at the numbers and decide for ourselves.

Let's say that you have $20,000 in credit card debt on two separate cards, with $10,000 on each one. Because credit card debt is the easiest form of debt to negotiate settlements on, a 50% settlement is very achievable. Therefore, we'll assume that the credit card companies will accept $5,000 each as a settlement amount. Let's also assume that the current minimum payment on your credit cards is 2% of the outstanding balance, for a total of $400 per month.

Now, if you are considering hiring a consumer debt settlement service to negotiate your debts on your behalf, you can expect to pay them a debt settlement fee equal to about 15% of your total debts. So, all-in-all you need to come up with $13,000 in order to pay off your debts for good. Divide $13,000 by 36 months and we get $361. Therefore, you need to come up with $361 every month for 36 months in order to have enough money to settle your debts and pay the fees. Doable? Probably. But... (there's usually a "but" isn't there)

What's The Ideal Timeframe To Settle Your Debts?

If you have been having trouble making the minimum payments of $400 on your credit cards, can you even come up with $361 every month? And if you can, is 36 months too long to go without paying your creditors? At some point they will likely come after you with a law suit, followed by perhaps a judgment and garnishment of your wages.

The ideal time frame to settle your debts is 12 to 18 months.

If you need to stretch the process out past 36 months you should think long and hard about whether this is the right debt relief program for you. And on that note, I will say this. If you are considering entering a consumer debt settlement program you should at the very least speak to a bankruptcy lawyer first. Although on the surface debt settlement seems fairly straight forward, deciding between debt settlement and bankruptcy can be a complicated process, and one best handled by a lawyer. Remember, debt settlement companies (if they are not lawyers) cannot offer you legal advice, so don't look to them for help in this area.

Another option is to speak to a debt company that offers an entire range of debt relief options, from credit counseling right through to bankruptcy. By dealing with a company like this, no matter what your debt situation is, you can be assured that you will not be slotted into a program that is not right for you. They will start the process off with a complete analysis of your financial situation, and from there, recommend the appropriate solutions to your debt situation.

How To Save Yourself The 15% Debt Settlement Fee

What if you didn't have to pay a 15% fee on top of the settlement amount? What would the numbers look like then? Let's see...

$10,000 divided by 36 months equals $278 per month. So instead of $361 per month, now you only have to come up with $278. This number looks better, but how are you going to avoid paying the 15% fee? Three letters...


Do-It-Yourself Consumer Debt Settlement

By negotiating you own debts you can save yourself a tremendous amount of money. If you have $50,000 in credit card debts and you do your own debt negotiating, that's a savings $7,500. Let's put that $7,500 in perspective. Instead of paying that money to the debt settlement firm, you could realistically settle $15,000 to $20,000 worth of your debts with that money!

The problem of course is figuring out how to settle your own debts.