Because debt settlement will not work for everyone, here are a few qualities that make someone a good candidate.

• You owe $10,000 or more

• You have a lump sum of money available to settle your debts (from a friend or family member, a loan, savings, etc.), or the ability to pay a large amount into a trust account on a monthly basis to be used to settle your debts once enough is saved.

• Your debt is mostly unsecured debt, meaning there is no collateral involved. This kind of debt – credit cards, medical bills, bounced checks, etc. – work better for debt negotiation.

• You have an explanation for high debt that you cannot pay. Maybe you lost your job, faced a family emergency or death. Or maybe your interest rate was raised, or other fees were added to your debt.

• Most importantly, you have a strong long-term commitment to becoming debt free. Debt settlement is not usually a quick process, and if you are not willing to commit to financial discipline during and after your debt settlement, you may find yourself in a situation far worse than when you started.

Before answering this questions, we need to understand what exactly a credit rating is and how it is determined.

Put simply, your credit report is determined by your history of borrowing and repaying. If you pay your bills on time, and manage your debt well (meaning you don’t live beyond your means, accruing more debt than a small per cent of your income), your credit score will remain healthy. Other things, including your profession, and stability or lack thereof, also affect your credit report. When you apply for new credit, or for another type of loan, the lender or creditor checks your credit report to determine your creditworthiness, or how likely you are to pay your debt back. If your credit is good, you generally benefit from more loan opportunities, and lower interest rates.

Unfortunately, taking part in the debt settlement process will damage your credit rating. There is no way to avoid this for the simple reason that you stop paying your creditors. However, if you are having a difficult time making payments on time, your credit may already be bad. Keep in mind that other debt solutions, including Consumer Credit Counseling, and Chapter 13 Bankruptcy, also negatively affect your credit, usually more so than debt settlement because they are more prolonged. This means that it is longer before you are out of debt and on your way to restoring your credit. Also, declaring bankruptcy leaves a permanent mark on your credit record; debt settlement does not.

Upon completing the debt settlement process, you can quickly begin making efforts to restore your credit. The easiest way to do this is to pay your bills on time and limit the number of credit cards you have, and the amount that you use them. There is no quick fix for your credit score, only time and financial discipline.

The debt settlement process is a complicated one, which is why it is usually in your better interest to hire a professional to steer you through it. Once you’ve done your homework and chosen a credible and reputable debt settlement company or lawyer, what should you expect from the process?

Before any of the settlement negotiations begin, the firm will perform a complete analysis of your debts. Not all debts can be included in debt negotiation. Secured debts, which are debts that are backed by collateral to reduce the risk of the loan for the lender, as well as student loans, tax debts, and a few others, typically cannot be negotiated. Debt negotiation works best with unsecured debts, meaning there is no collateral involved. Examples of unsecured debt include credit cards, lines of credit, and medical bills.

After this is completed, you have two options to begin the settlement process. You can either put a lump sum of money into a trust account to begin negotiations with creditors, or, if this is not a possibility, you can make large monthly payments – at least 4% of your total debt – into a trust account. At this point, you stop making payments directly to creditors, and only into the trust account. Once there is sufficient money in your account to settle a debt, the firm or company begins negotiations with your creditors, one at a time until they are all settled.