Debt settlement agreements can be made between people with bad debt problems and debt settlement professionals. When these agreements are made, the first step is for debt sufferers to consolidate all debts into one total amount. Then, debt settlement companies will negotiate with creditors and financial institutions to dramatically reduce these debt amounts. The amount of money that is reduced from debt totals will depend on individual circumstances.

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Debt settlement is a great option for those who have serious debt problems. There are many less aggressive options for mild debt cases. For instance, those with some credit card debt may choose to transfer balances to a zero or low interest credit card while they are trying to pay off their debts. Then they will not have to worry about continually adding debt from interest charges.

When debt cases are severe, debt consolidation is often necessary. After debts have been consolidated into one amount, they can be reduced by individual payments, by taking out a loan, or by using debt negotiation. Debt negotiation is the primary function of debt settlement companies. Because these companies are very skilled in negotiating, they can reduce debt totals by up to 60 percent in most cases.

Debt settlements can settle debts from credit cards, medical bills, auto repossession, collections, personal lines of credit, personal loans, or unsecured loans. However, they will typically not deal with lawsuits, utility bills, auto loans, student loans, government loans, or the IRS. Debt settlements are ideal for those who are constantly harassed by phone calls and letters regarding their debt issues. They are also the best alternative to bankruptcy.

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