When the recession of 2001 hit the U.S. economy, many consumers found themselves in a precarious situation in regards to their credit card debt. With the job market hurting, the stock market under performing, and bills piling in, many people who had overspent became overwhelmed with personal debt. Fortunately, a solution emerged that went on to become wildly popular, particularly on the internet. This solution was called debt settlement.

Debt settlement became a hot relief option for consumers for a variety of reasons. For one, it presented a better alternative to bankruptcy (for those that could avoid it); and two, the settlement of debt allowed consumers to eliminate a debt that would otherwise take a lifetime to pay off with monthly installments.

Unfortunately, debt settlement was not without its flaws — with many of which being exposed and exploited over the past decade. These problems included a complete lack of FTC regulation of the industry; and a negotiation process that often resulted in consumers being threatened with creditor litigation, without the means to hire adequate legal representation. The former problem resulted in unscrupulous businesses flooding the internet with unworkable and sometimes fraudulent debt settlement programs, often making undeliverable promises to unsuspecting consumers; and the later resulted in a significant amount of consumers being forced to drop out of their programs.

As a consequence of the major issues plaguing the debt settlement industry, the debt relief method largely lost its credibility in the eyes of the public. Through a number of media exposes, the industry developed a reputation as being ineffective and unsafe. While this negative reputation was certainly earned, the merits of debt settlement itself have never gone away. It was only a matter of time before these merits could again be utilized for effective consumer debt relief.

Nearly a decade after America\’s last recession, that time has come as consumers may be in a worse financial position than ever before. They are again looking for a creative debt relief solution, and now, debt settlement has risen from the ashes to provide one. A combination of innovation and FTC regulations has not only cured the debt settlement industry of its ills — it has made it a more viable debt relief solution than ever before.

The FTC\’s sweeping reforms have effectively gutted the industry of the unethical and under-equipped debt settlement companies. The most significant of the regulations mandates that these services can no longer accept up-front fees. This means that the consumer doesn\’t pay negotiation fees until their debt is actually settled. Because it can take years to settle a debt, the \”fly by night\” companies simply cannot afford to operate under the new business model.

While federal regulation has minimized the risk posed by predatorial practices in debt settlement, innovation within the industry has also made improved upon the negotiation process to make it a much more effective form of debt relief.

The innovation that has taken place has radically altered the way a debt is settled. Previously, a consumer would refrain from paying their creditors; and instead, they would deposit their payments in a savings account. After a period ranging from several months to many years, the consumer would use this accrued money as a settlement offer. As discussed above, this often resulted in law suits, and also severely damaged the consumer\’s credit score.

To correct this shortcoming, many debt settlement companies have introduced a concept that\’s called \”debt restructure.\” Under debt restructure, the consumer\’s debt is shopped to third parties in a \”debt buyer\” system. In this process, a third party agrees to purchase the consumer\’s debt from the creditor at a very early stage of enrollment. This results in a win-win situation for all parties involved — the creditor gets paid and the consumer\’s credit repair process begins almost immediately.

As you can see, debt settlement is not only back — it\’s more viable than ever. If you are a consumer looking for solutions, don\’t dismiss this debt relief option due to what you\’ve heard over the past few years. The industry has changed, and so has the way the program works. For more information, see the resource box below.

Author Bio: Consumer Debt Relief Help Provided by Debt Relief Advocates. For more information on debt settlement or other debt relief options, visit our website.

Category: Finances
Keywords: debt settlement, debt relief, debt restructure