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Love and Debt: Why you need to talk about money

How to Stop Living Paycheck to Paycheck

Where to go for mortgage and debt help

What You Should Know About Debt Settlement

Create a plan to deal with medical debt

Options for Higher Education

Will Changes in Credit Reporting Affect You?

What to do if your medical bills are turned over to collections

What to do if your spouse can't pay his or her bills

What to do when a family member ruins your credit

Homeownership is possible

What you need to know about the IRS and collection agencies

Will being turned down for a store credit card hurt my credit?

Beware of credit repair

Debt Management versus Debt Settlement

How to get ahead of late fees

Is There a Service That Helps You Not Pay Bills

Is a Debt Owed

Patience is the key to furnishing a new home

How to split expenses with your partner

Will my boyfriend's bad credit affect me?

What to do if your account is turned over to collections

Personal Credit and Starting a Business

Finding Money to Reduce Your Debt and Improve Your Credit

Simple Keys to Personal Finance

Be vigilant to avoid telephone and internet scams

Debt Settlement

Understanding credit utilization

The pros and cons of skipping a payment

Keep an open line of communication with parents about their finances.

Make a Choice to Get Ahead Financially

What to do when a relative asks you for money

Should You Buy a Home Now or Wait?

The difference between debt settlement and debt management

The negative impact of paying a payment 30 days late

Stressed by Finances

How to navigate two significant financial decisions: starting a family and buying a home

How to advise someone close to you who is coming into a significant amount of money

Make a Conscious Decision on How to Spend Your Money

How do you know if you have a good credit score?

Americans spend more money eating out than on groceries

Having Good Credit Saves You Money

Developing good money habits with your first job

How to save for a home

How to Know if you are Ready for Home Ownership

When is the right time to buy a home?

You can improve your credit to buy a home

Plan a Memorable Vacation Without Incurring Debt

The Hidden Costs of Payday Loans

Be Wary of Credit Repair Services

Use Caution when playing the credit card game

What does it mean to say bankruptcy gives you a clean slate?

How your credit is affected by various debt options

Be wary of predatory small business loans

What to do if you fall behind on mortgage payments

Financing a College Education

Money, Credit and Relationships

Should you be concerned with your date's credit scores?

Best options for a small, short-term loan

How to help a relative who is always borrowing money from you

Skipping a Payment over the Holidays

What to do if you are overwhelmed by medical bills

Make your financial intention a financial goal you can achieve

What to do when a collector calls you

The difference between paying bills and managing your money

My wife and I have gone through some tough financial times, which eventually led us to file for bankruptcy.  Following this experience, I don’t ever want to use credit again, but my wife

What do I need to know to pay ahead on my mortgage?

What to do if you get an unsolicited credit card in the mail

What to do when moving in to share expenses doesn't work out

The difference between debt settlement and debt management

Q. I recently received an advertisement that outlined the benefits of working with a debt settlement company. According to what I read, debt settlement can offer faster results than credit counseling can. It said resolving debt using credit counseling can take more than five years.  I’m confused about the difference between debt settlement and credit counseling. Can you explain the difference to me?

A. Debt settlement (sometimes known as debt relief) is not the same thing as a debt management program offered by a non-profit credit counseling agency. Unfortunately, many consumers are confused about what kind of program they have enrolled in when they’ve sought help repaying their debts.

In a debt management program, you send in a single payment, which the credit counseling agency forwards to all of your creditors on your behalf. The credit counseling agency works with your creditors to accept an agreed-upon monthly payment and asks them to reduce or waive fees and interest. When you make monthly payments in a debt management plan, your debt goes down. And as you reduce your debt, your credit score increases.

The length of a debt management program will depend on the amount of your debt and the amount you pay toward what you owe. In many cases, a consumer can complete a debt management program in less than 36 months.  

On the other hand, a debt settlement company collects a monthly payment from you. But instead of using this money to pay your creditors, it holds what you pay them until offering a lump sum payment (or settlement) to one of your creditors. In the meantime, all of your accounts continue to go delinquent, and you continue to accrue interest and late fees. 

Our counselors frequently work with unsuspecting consumers who get trapped in debt settlement programs. These consumers explain that they are making payments, but that their creditors are not getting paid. Not only is their credit getting worse, but they often aren’t able to get a hold of anyone at the company to discuss this.  

As a rule of thumb, if the company you are working with tells you not to talk to your creditors, advises you to change your address to theirs, or fails to send your creditors any payments, then you have enrolled in a debt settlement program.  

If you want to settle a debt, there’s no need to pay thousands of dollars to a debt settlement company. You can make a settlement offer directly to your creditors yourself, though keep in mind that whenever you settle a debt by yourself, or through a company, this information will show up on your credit report as a settlement, meaning that the debt was not paid in full. A settlement will negatively influence your credit score, and you will end up owing taxes on the forgiven debt. 

However you choose to handle debt repayment, I encourage you to make certain you know what you are signing up for before you sign any agreements. Don’t be fooled into signing up for a debt settlement plan if a debt management plan is what you truly want.

Bonnie Spain is the executive director of the American Center for Credit Education and Consumer Credit Counseling Service of the Black Hills. For more information, email

The material in this transmission is provided for personal, non-commercial, educational, and informational purposes only. ACCE makes no representations or warranties with respect to the accuracy or completeness of the contents of this transmission and assumes no responsibility for errors, inaccuracies, omissions, or any inconsistency herein. You should consult a professional where appropriate.