According to an article in the Star-Telegram, debt settlement can often leave debtor's worse off than they were before they attempted to settle the debt.
The article said:
Anybody buried in bills has seen the ads or received letters or calls from companies promising to settle credit card debt for 50 cents on the dollar. The pitch is that debt settlement is a better way out than credit counseling, debt consolidation or bankruptcy. But many consumers have found that debt settlement offers can be an easy way to lose $800 or more in fees to the debt settlement companies.
Debt settlement, unlike bankruptcy, is not a guaranteed way to get out of debt. Creditors are under no obligation to work with debt settlement firms. One of the problems with debt settlement firms is that they ask that customers stop paying their bills and instead send money to the debt settlement firm to save for a future lump sum payment to creditors. Unfortunately, many of these debt settlement firms charge very high fees and/or never send any money to creditors. In the meantime, creditors often decide to take aggressive collection actions against the debtor such as filing a lawsuit.
Once a creditor has won a judgment, they can garnish wages and seize the bank accounts of the debtor which can create even more problems. Before signing up with a debt settlement firm, do your homework. Many debt settlement firms are not legitimate and if they are they may not be appropriate for your situation. Remember, filing Chapter 13 bankruptcy can help a debtor repay their debt under reasonable terms and within a reasonable amount of time. Contact a Dallas-Fort Worth bankruptcy attorney to find out more information.