Debt settlement appeared when the recession started as a method to keep the people on the floating line. A lot of people had their salaries reduced or got fired so they couldn't afford to pay the installments for the loans they took. To get rid of this situation they only had one possibility, bankruptcy. Bankruptcy also destroyed the economy making it harder for the country to get over recession. The government decided that there should be a program implemented that offers people a viable option instead of bankruptcy. This program is called debt settlement.

Fortunately for people eligible for a settlement, the program pays back the reductions their creditor makes. This way the reductions are bigger and people get more affordable rates or installments on their debt. They manage to pay their debt in 1-3 years and after that their credit score remains high and they can take other loans. If they choose bankruptcy, those two are not possible. They cannot get another loan because their credit score will keep them from doing it and bankruptcy also remains on their credit report for 7-10 years. This makes it hard for most people to even consider getting a smaller loan.

With the new laws, debt settlement is even more affordable and risk free. The Federal Trade Commission issued a law that would make it easier for people to use a settlement. This law completely eliminates upfront fees that debt settlement companies were charging and makes any payment illegal until completion of negotiations. This means that you won't pay anything until the settlement company will negotiate your debt. Many people lost money because debt settlement companies promised that they will negotiate and they never did. They had to file for bankruptcy because the companies delayed their case. Now this can no longer happen and settlement is more secure.

To be eligible for a settlement you need to have more than ten thousand dollars of unsecured debt. If you don't have this amount of debt you should choose another option like financial consolidation or counseling. Debt settlement will not work with mortgage loans or secured credit cards, but it can work with student loans, business loans, unsecured credit cards and medical loans.

Debt settlement is a legitimate alternative to filing bankruptcy. Consumers can expect to eliminate around 50% of their unsecured debt with the help of a legitimate settlement program. With the new FTC laws recently passed in July 2010, debt settlement is a much less risky option. If they don't settle your balance you don't have to pay a dime.

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