Dear Debt Adviser,
For credit card debt reduction, how does one know the genuine companies? There are many wolves in sheep’s skin lying out there. Could you mention just a few genuine ones? Thanks.
— John

Dear John,
If by debt reduction you mean getting your creditors to accept less than you owe and call it square, you are wise to proceed cautiously. Lenders do settle some debts for less than full balance, but many of the companies that advertise their debt settlement services operate with policies that are not consumer-friendly.

The many problems created for consumers by some debt settlement companies have prompted the Federal Trade Commission to issue new regulations for the debt settlement industry. One new rule requires for-profit companies that sell debt relief services to no longer collect an upfront fee before actually settling and reducing a consumer’s debt. It becomes effective Oct. 27.

My first suggestion is to consider doing it yourself. If you don’t have a windfall chunk of money and you want to pay less than the full balance of what you owe on your credit card debt, you can attempt to negotiate a debt settlement with your creditors on your own. The catch is you will need to be able to pay something on your account each month to keep it out of collections while setting aside money for a lump-sum payment. Saving enough to satisfy your creditors may take many months. While you are saving, the fees and interest on your accounts will continue to accumulate, and your credit may deteriorate.

You might consider contacting a nonprofit credit counseling agency for assistance. You can find a trusted agency at or A certified counselor will complete a thorough review of your finances for free. They’ll help you determine whether you can afford to repay your creditors with some help from reduced interest, waived fees or, in some cases and for some creditors, a reduced balance. This help is free of charge and has a lot less impact on your credit than a traditional debt settlement.

A third option is to contact a settlement company to negotiate with your creditors on your behalf. To locate a debt settlement company, contact one that is a member of The Association of Settlement Companies. To be certain you are better-protected, you might consider waiting until after Oct. 27 before contacting a company.

Finally, you can use an attorney to negotiate a deal for you or, if need be, help you assess whether bankruptcy is right for you. You can find a reputable bankruptcy attorney at the National Association of Consumer Bankruptcy Attorneys. Debt settlement and bankruptcy will leave you with bad credit, and using a credit counseling agency may or may not affect your credit. That depends on who you have for creditors and their policies for reporting credit counseling accounts to the credit bureaus.

Good luck!

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