If you are recovering from loss of employment, a long illness or another catastrophic event, then you are probably looking at an insurmountable mound of debit and are desperate for a way out. You may have seen or heard ads that say “For a fee, a professional debt settlement company will help you get out from under your debt for as little as half the amount you owe.

Even though it may seem like a scam, debt settlement is a legal solution for those who are in deep and seeking an alternative to bankruptcy. The problem lies in having the debt settlement company do the legwork for you is riddled with risk, not to mention all the shocking fees.

First let's look at some basics. A debt expert will tell you it is a fact that as you fall further and further behind in making payments on your debts, your creditors would rather agree to settle your debts than have you file bankruptcy and receive nothing.

In exchange for the agreed upon amount, which is usually a one-time payment somewhere between 20 and 75 percent of the total amount you owe, the credit will report to the credit bureau as the account is settled. Until that time you will need to put money aside toward the settlement and stop making payments to your creditors. The balance of your settled accounts will show a $0 on your credit reports. Any previous history of late or delinquent payments along with any charge offs will remain the same on your credit report.

This is not that amazing because creditors do not like to advertise debt settlement. Creditors will also make it difficult to obtain a debt settlement. As long as your bills remain current creditors will not negotiate a debt settlement and often times will refuse to even discuss settlement until you are three to six months behind.

Chances are you will be working with several creditors. Normally you would tackle each debit one at a time as you gather the money to pay them off. It is difficult to know which creditor will agree to settle. Some creditors will agree more quickly than others. This can make life difficult for you.

Keeping all that in mind, once you have signed up with a debt settlement company, you will pay dearly for their services. Attempting to find out the cost of the companies' services can be difficult at best. One person commented on how difficult it was to get a straight answer for any of the debt settlement companies about their fees.

Some companies charge a percentage of the total debt, which runs about 15% or 18%. This amount is paid before you start amassing savings. Other charge a percentage of the debt savings, which usually runs about 25%. This fee is paid after you have settled, plus an initial sign-up fee and monthly service charge. Then there those debt settlement companies which will charge a flat monthly fee throughout the length of the program.

The industry itself will admit figuring out the costs is challenging. It can be very confusing. Some people believe it is worse than confusing it is prohibitively expensive. An attorney in Iowa came across an offer to settle $33,551 in debt with a probable service fee of $5,032 that was to be paid in monthly installments. Only after the service fee was paid off, two years later, did the client actually start saving for the settlement.

Think about it, for $5,000 you could pay for a consumer attorney to help you file bankruptcy. If you are in need of a debt settlement company's services, beware they can charge you an arm and a leg. Look carefully for the company that will do you the most good.