With the current economic recession, many Americans are struggling to just barely get by. Recreation and luxury items are passed over for essentials like food, transportation and the ever mounting stack of bills. While some of these bills get put off, most people end up barely paying the monthly balance on their credit cards. Recently, a lot of credit cards have raised their Annual Percentage Rate by dramatic amounts to cover losses in the sub-prime mortgage crisis and the ones who suffer are those who are already on the verge of financial collapse. There are more foreclosures every day and many are looking at bankruptcy as the last solution to their problems.

So when commercials come on the television or emails are sent offering a debt settlement program that can cut their current debt in half, many people are persuaded to take think that this is their best solution.

Before you pick up the phone or reply to that email for debt solutions, get some solid facts about debt settlement programs.

Chances are that if you have a sea of unpaid bills you have been tempted by ads that claim they can help settle your debt for you.

These ads state that for a fee they, as a professional debt settlement company, can relieve you of your debt for almost half what you are paying now. They state that they will negotiate with your credit card companies and get them to make a settlement on your current balance.

They usually do this by charging you an outrageous fee, sometimes thousands of dollars, and there is never a guarantee that they will deliver any substantial debt relief.

The truth is that they don’t want to tell you that you can do this yourself. If you are behind on your payments and facing bankruptcy, all credit card companies would much rather negotiate a settlement then risk getting nothing at all. Sometimes this debt can be reduced as low as 25% of what you currently owe.

Once you have made this lump sum payment, your credit card company will forgive the rest of your debt and report the matter settled to the major credit bureaus.

If you are already falling behind, the best thing to do is stop making payments and set this money aside for a few months while you wait to negotiate terms with your creditors.

To the average person, debt settlement and debt consolidation seem like the same thing, but they are two different programs that in the end might cost you more in the long run. Both offer a way to help you get out of your current debt problems and both have their own way of going about this endeavor.

With debt consolidation, a debt consolidator works with your creditors in trying to reduce the overall amount of your debt. They usually do this at the sacrifice of converting your unsecured debt into secured debt by using your property against this new debt package. Overall, your monthly payments are reduced, but now they are extended over a longer period of time with a higher APR than your original debt and a 10% monthly fee going to the debt consolidation company.

On the other side, a debt settlement program advises you to give them your money every month while they try to negotiate a deal with your credit card companies. This results in the stopping of payment to your debtors during this period which drastically reduces your FICO score, all in hopes that eventually your debtors will cave in and settle at a lower amount of the debt. During this time, these debt settlement companies charge large fees, usually several thousands of dollars without ever guaranteeing a result.

So, you still want to go through with a debt settlement program, but don’t know which one to choose from. The reality is that debt settlement is not for everyone. If you are already heading toward bankruptcy and don’t qualify for Chapter 7 bankruptcy which writes off most unsecured debt at the expense of some secured debt, than you might want to consider a debt settlement program.

Another thing to look at that by choosing to settle your debts instead of bankruptcy is this is a taxable event at around 15% of the debt. Add to the fees of your settlement company which could be as high as 20 to 30% of the bargained settlement, and you could find yourself in more trouble than when you started.

If you do decide to settle your debt in this manner, you might want to check with The Association of Settlement Companies which is a watchdog group that keeps an eye on the industry by setting strict codes and regulations before they will give accreditation to these businesses. Also to note, the Better Business Bureau does not recognize debt settlement companies as legitimate industries of business and refuses to let them join.

If you want to learn more, visit TASC at http://www.tascsite.org.

For more information on debt settlement, watch the following video.