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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

Debt Management versus Debt Settlement

Q. My brother told me that he plans to use the services of a debt settlement company. Curious, I researched the company and found they had an F rating at the Better Business Bureau. My brother is retired and is already struggling. I worry that this company will only make matters worse for him.  What can I do?

A. Perhaps the most important thing you can do is to help him understand how a debt settlement company works. With a debt settlement service, he will make a monthly payment to the debt settlement company, rather than paying his creditors. In turn, the debt settlement company will put his money into an account, but they will not send monthly payments to his creditors. 

Because his creditors won’t be getting paid, he will continue to accrue interest and penalties.  His balances will also continue to grow, and each month his creditors don’t get paid, his credit score will suffer.  When the debt settlement company determines that your brother has enough money to pay a single creditor, they will make a settlement offer.  Meanwhile, the rest of his creditors will still go unpaid. As a result, some of his creditors may choose to sue him for non-payment.

If your brother is struggling financially, debt relief can sound encouraging, especially if he believes he will only have to pay a portion of what he owes. However, as enticing as a debt settlement program may sound, it usually creates more problems than it solves. Instead of digging out of debt, your brother will only be falling further behind on his bills if he opts to use a debt settlement company.

It would be much wiser for your brother to seek help through a debt management program.  In a debt management program, your brother would still send in a single monthly payment, but the company would pay all of his creditors each month.  He may also qualify for reduced fees and interest as part of the program, which would help to pay down his balance faster.

Debt management and debt settlement sound similar, but they are completely different programs. There are a few quick ways to tell the difference between them.  If a program claims that you only have to repay a portion of your debt, then this is a debt settlement program. If you receive a monthly statement from the company, and it shows you made a payment to them, but that no creditor was paid, you are in a settlement program.  If the company tells you not to talk to your creditors or advises you to change your address to theirs, you are in a settlement program. 

If your brother won’t heed your advice, or if he is still confused about the difference between debt management and debt settlement, you may wish to refer him to a non-profit, accredited credit counseling agency.  A counselor will help your brother analyze his situation and offer him personalized advice to create a plan for repaying what he owes.

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.