Debt Negotiation: A Bright Side to the Dark Side

I'll admit I have taken some heat for recommending debt settlement as a sometimes appropriate solution to overwhelming debt. In fact, I devote an entire chapter in my latest book, Reduce Debt, Reduce Stress to this approach.

In the book, I encourage consumers to check with a credit counseling agency and a bankruptcy attorney before talking with a settlement firm. Most bankruptcy attorneys are not fond of settlement, though I've talked with an increasing number of people recently who said their attorney recommended they consider settlement when filing wasn't an option.

One of the points that sometimes gets lost in this discussion is the fact that consumers who do successfully settle their debts pay back at least some of what they owe to their creditors. The trade association for that industry, TASC, revealed recently that the industry returned more than $2.2 billion in consumer debt last year. In addition, TASC’s research shows more than $500 million in settlement funds saved by consumers are available to credit card companies today.

The fact that these debtors are paying back some of their debt, rather than erasing balances in bankruptcy, has to be positive news to creditors. Losses hurt either way, but something is better than nothing. And most people I speak with want to pay back as much as they can and avoid bankruptcy if they can.