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DC debt settlement and consolidation requires caution

Many residents of Washington, D.C., and surrounding areas are aware that debt has become a national problem that affects millions of Americans. For many people, their problems began with unrestrained credit card use. For others, trouble began with unanticipated medical expenses, sudden unemployment, enormous student loans or sudden jumps in mortgage payments, caused by skyrocketing interest rates. Whatever the cause, for many DC residents, getting out of debt has come to seem nearly impossible.

Fortunately, debt recovery is possible. Bankruptcy is one option, and many people find the relief it offers worth the short-term hit to their credit rating. But, two other options may be worth a first look: debt settlement and debt consolidation. Choosing the right one comes down to each debtor's circumstances and preferred approach to debt relief.

Basically, debt settlement reduces the amount someone owes, and consolidation reduces the number of creditors owed. Settlement often ends up with a negotiated lump-sum payment for less than what the debtor owes. It generally reduces the amount of principal the debtor owes. Debt consolidation, on the other hand, usually combines all of the debtor's obligations into one debt with one creditor that is then paid-off over time.

Neither approach will completely eliminate debt. A debtor will still be paying off debt for a prescribed, but perhaps, manageable period of time. Both approaches can be difficult for debtors to understand. This is where a creditable debt-relief firm can make a difference. It can lay out the pros and cons of each approach. The downside, of course, is that the services of most debt-relief firms are not free, and more than a few have turned out to be scams that merely make people's financial troubles worse. For that reason, consulting an attorney with experience in debt relief may be the best first move.

Source: Debt.org, "Debt Settlement vs. Debt Consolidation," accessed on March 14, 2015.

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