Debt settlement is good alternative to bankruptcy for many consumers struggling with high credit card debt. In most cases, consumers will hire a professional debt settlement company to work with their creditors to pay off their debt at a reduced amount. Fees often range from 15-25% of the amount saved.

But do you need to pay a company to settle your debts?

For most people, it is a good idea to hire a professional company. There are several reasons:

1 - The creditors usually take a professional more seriously

2 - These companies often have relationships with the creditors and will be able to get you a better deal

3 - While the process is not difficult, it does take time, effort, and patience.

However, if you are ready to take on this task by yourself, here are a couple of tips to help you through the process:

• Realize that settling a debt is like negotiating anything - you need to give something in order to get something.

• Just because you feel that you are offering a good deal, does not mean the person you are negotiating with thinks the same way. So, you may have to make several offers before one is accepted.

• Many people think that protecting their credit score is a key point - but the goal of debt settlement should be getting out of debt (why would the creditor give you a discount AND good credit? You can certainly try, but don't be surprised if this part of the offer is not accepted).

• In most cases you will need to pay in one lump sum, not payments (see the first point above). So you will need to have some money in reserve.

• If you are not already behind on your payments, you will need to stop paying to gain leverage. After all, why would the creditors give you a discount if you are paying on time? Take this money and set it aside for your settlement payment.

• Finally, be patient. Negotiations can take time. But the longer you can hold out, the better deal you will get.

If this does not sound like something you can accomplish on your own, then you should seriously consider hiring a professional debt settlement company.

Otherwise, get ready to roll up your sleeves, make a few phone calls (letters are not as effective), begin negotiating.

And start making plans for using the money you save wisely, and avoid getting into credit card debt all over again!

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If you are asking yourself the question: does debt consolidation work? Then you are probably in a position right now, where consolidating your debt is something you have been seriously considering. There is also a chance that you have heard that consolidating debt may in fact be bad for your credit score. If these are concerns you have, then you should read the rest of this article.

- How Debt Consolidation Works:

Debt consolidation is very easy to understand. Basically take all of your monthly payments, specifically credit cards, student loans or other store credit cards. Now imagine that there was a lower monthly payment you could make to pay all of those debts down every month. That is the idea behind debt consolidation. So on paper, this certainly sounds like a great option. But is it right for you?

- Credit Card Transfers and Home Equity Loans:

There are two major ways to consolidate your debt. The first involves taking all your credit cards and transferring them to a promotional credit card offer that allows transfers for a lower APR (annual percentage rate). This will allow you to have one low payment and will also allow you to pay off more of your debt every month because you will be paying lower interest. This could be a great option, but keep in mind that you will need a pretty good credit score to have this option available.

The other way is through a second mortgage or home equity loan. This option is only offered to those with equity and those with a home. This can be a great decision if you have equity in your home and are willing to do the homework to make sure this is the right decision for you. Those two ways to consolidate debt really do work and should seriously be considered when asking yourself whether debt consolidation is a good option.

- Bad Debt Consolidation?

Some debt consolidation, like going to a debt consolidation company, may at first hurt your credit score. But ultimately this will allow you to pay off your debts quicker and will ultimately lead to an increase in your credit score. This option is great if you have poor credit and wish to consolidate your debt. However, if you can pay off your credit cards in a reasonable amount of time, say within the next two years, then a debt consolidation company may not be the best option.

- Does Debt Consolidation Work?

The answer is that debt consolidation really does work. All of the options are usually going to be better then keeping your debt in small piles in high interest accounts. Do yourself a favor and start consolidating your debt as soon as possible. You will be glad you did.

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If you can't keep up with your credit card bills, then debt settlement might be the right solution for you.

Many consumers think that they can negotiate their credit card bills using a debt settlement letter. Unfortunately, while this sounds like a good idea, it usually does not work.

Why not?

There are several reasons why debt settlement does not work by sending letters.

Letters can get lost. While the U.S. Postal Service is usually quick and reliable, letters can still get lost. Or they can get delivered, and then get lost in a pile of paperwork on some clerk's desk. Even if you send by registered or certified mail, or use a service like FedEx, there is no guarantee that the letter will be read by the right person.

Letters don't get to the right person. Each credit card company usually has a staff that handles settlements. Even if they allow the process to work through the mail, there is no assurance that your letter will get a response. Especially if your offer is not accepted.

Letters don't have the same impact. While "sob stories" don't usually help, there is no substitute for personal contact. Handling yourself with dignity and class, and explaining your hardship clearly, go a long way to making the negotiation process work for you.

So then, how does the process of debt settlement work?

- First, you need to talk with the right person or department. Most customer service people you reach by calling the credit card company's 800# usually are not the right people to talk with.

- Second, you need to be prepared to make several contacts. Most settlements are not accepted from the first contact. Or the second contact.

- Third, you are working with other people. So by stating your case clearly, and handling the negotiation process politely, will help you get the best deal.

So, while debt settlement letters sound like a good idea, in most cases you will need to pick up the phone (and probably more than once) to get your settlement offer accepted.

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Primarily collection agencies work through letters and telephone calls. Third-party collection agencies party basically works on commission basis.In which they receive a percentage of the amount that they collect.These agencies offer services to lending companies such as credit card firms, insurance firms, healthcare providers, automotive firms, financial institutions, banks and utility service providers like telecom and electric.Some agencies even purchase large groups of charged-off bad debts for a small percentage of the "face value". After the debt is sold, the debtor now owes the full amount to the purchaser. Collection companies main task is may not only offering due accounts recovery but also help with financial solutions as well as loss prevention. Collection agencies work with the lending corporations and would recommend the most appropriate approaches for successful collections of due accounts. It may not only offer due accounts recovery but also help with financial solutions as well as loss prevention.

What is Collection Agency?

Collection Agencies are the type of business which pursues payments on dept owed by individuals or business. Mostly Collection Agencies act as agents of creditors and collect debts for a fee or percentage of total amount owed. Collection agencies are well recognized and sanctioned business entity. The main task of collection agencies is to collect debts owed to its mother company by its company’s customers. There are two types of collection agencies (a) first party agency and (b) third party agencies. In first party agencies the company is get involved earlier in the debt collection process and have a greater incentive to try to maintain a constructive customer relationship. In Third party agencies the  creditor assigns accounts directly to such an agency on a contingency-fee basis, The term collection agency is usually applied to third-party agencies, called such because they were not a party to the original contract. Most of the collection agencies have lawyers who file a case at the court to force the debtor to meet his or her obligations. This is done in a hope that the receipt of legal documentations would induce the debtor to make a payment on the debt due or at least make efforts to communicate with the creditor for a repayment plan. Collection agencies try to use all the available resources to track down debtors.

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Work with what you’ve got.That’s what my mom always told me growing up, anyway. She’d unleash that saying whenever I would whine because I didn’t have a fancy enough bike, couldn’t afford the latest toy or outfit, or, later, when I didn’t have enough to go to my favorite college. It used to frustrate me to no end. But the woman had a point.

Most of us Americans spent the last decade or so spending money we didn’t actually have. If money is supposedly the root of all evil, then lack of money—credit card debt, more specifically—is a close second. It’s not just the debt, but the interest that kills you—once you’ve overspent, it’s all too easy to keep using the credit card to pay off your purchases. How else are you supposed to do it, unless you win the Lotto or suddenly receive a massive inheritance, right?

But there is a way! You just have to—you guessed it—work with what you’ve got. And if you can master that, solving the rest of your money woes will be a breeze (alright, maybe not a breeze, but it will be a heck of a lot easier).

The fastest way to save is to cut back on your (gulp!) favorite vices, e.g. shoes, coffee, techno gadgets, beauty products, etc. If you’ve got an addiction to it, you’ve probably already got a stash that can tide you over. I recently cleaned out my bathroom and realized I had seven different kinds of shampoo, each about three-quarters full (did I think each new bottle was a miracle product that would cure my perpetually frizzy hair? Did I think the bottles were pretty? I don’t know). I vowed then and there to not buy another hair product until I had used every drop of what I already had. The same goes for my lipstick, lotions and other beauty potions.

If you clean out your closet, I’m sure you’ll find plenty of shoes that haven’t seen the light of day for a while—pretend they’re new! Lusting after the latest cell phone or PDA? Hold off for awhile. You know you’ll be itching to replace it six months later, when it’s already outdated. Are the kids begging for new toys already? Explain to them why it’s important to appreciate the stuff they already have—probably some of which they just got for Christmas. Once you start working with what you’ve got, you might even savor the breather from material things. When the economy took a dive last year, it’s like it held up a mirror to our culture for the first time—and it was a little bit scary. But now that we know what we don’t like about ourselves, it’s time for a makeover.

Now, along with the material stuff, you’ll probably have to brainstorm other ways to cut back. This is the hard part. If you’re using cash (good for you!), try putting all of your loose change into a jar. Every month, turn it in and put it towards your debt. Maybe you can turn the heater down a few degrees, carpool to work or go jogging in your neighborhood instead of paying for the gym. You’ll find a lot more ideas in our Financial Toolbox (which you can order here, or get by signing up and attending one of our free workshops). A little bit here and there will add up without feeling too restrictive. But if it doesn’t add up enough, don’t give up. Instead, reach out. Get your worries off your chest by talking to a friend or relative. And get help by working with an expert—what you’ll get when you sign up for our free personalized debt analysis. We’ll show you how to work with what you’ve got to get where you need to go.

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