I'm seeing and hearing a lot more commercials advertising for these "debt management" programs. I've discussed my own experience with these scammers before. The idea is that instead of paying individual credit cards or creditors, you'll send a lump-sum amount to your "debt handler," and the debt handler will "negotiate" a "settlement" reduction on your behalf. Usually, the hook is that the debt settlement company is an "expert," or "specially trained negotiator," who will help you settle for pennies on the dollar.
This usually sounds like a good idea, but ends up being worse for you. Here's why:
First, the debt settlement company isn't doing anything you couldn't do yourself, for free. Generally, creditors sell delinquent debts to debt buyers, after the debtors drop a particular number of days delinquent, often 90. The debt buyer buys these debts at a steep discount because both companies know that the longer a debt goes delinquent, the less likely the debtor will pay it back. When the settlement company "negotiates" a discount, they're usually tapping the debt buyer's lowest acceptable amount, and charging you a "service" fee to handle it. You could do this very easily, and save yourself a large chunk of change. Note too, because buyers can sell these debts numerous times, it's ALWAYS a good idea to dispute the validity of the debt, and ask the creditor to produce the note.
Second, while you wait to build up enough cash, you're not paying your bills, and therefore, you're falling further delinquent and causing yourself to incur a larger amount of fees and interest. Many creditors will work out payment arrangements to help eliminate the delinquency.
Third, creditors will trash your credit while the settlement company "negotiates" the payment. Worse, the creditor may sue you to recover the delinquency. This is often riskier, with many potential consequences, than working a repayment plan.
Finally, it's very likely that you're not going to finish "working the plan," and therefore, you'll only pay money to the settlement company, and never end up paying the creditor. You've just lost any equity to the credit card company, and you're back to "square one." This reality is often the most painful realization for debtors.
If you're really serious about paying back your delinquent debts, it's totally possible. When I worked for a major credit card company, we'd counsel our debtors to "snowball" their payments. Talk show radio host, Dave Ramsey, has since made a fortune on this (and other) principles.
The idea of the debt snowball, is that you concentrate all of your payments to eliminating one debt at a time. You pay the minimum payment on all of your debts, and choose one debt (largest or smallest – I prefer smallest because paying off the debt feels good, and creates motivation) to send all of your extra money to. When that's paid, you send all of your money to another credit card (largest because larger cards require larger minimum payments). Pretty soon, you've paid off all of your debts, and you're on the path to financial freedom, plus you're moving on with your life.