 TITLE: What Is Debt Settlement? CONTENT: How Does Debt Settlement Work?\n------------------------------\nWith debt settlement, debt relief companies typically have you stop making all payments to your creditors and instead have you make monthly payments into a savings account they set up for you. They'll then try to use the money in that account, even if it's less than you owe, to pay off your debt. Depending on how many creditors you have and the size of your outstanding debt, collecting enough money to make a worthwhile offer to lenders could take as long as three or four years.\nWhen the debt relief company determines it has sufficient funds, it reaches out to your creditors on your behalf, offering partial payment of your debts as a preferable alternative to getting no payment at all. The implication is that if you file for bankruptcy, lenders may not ultimately collect any of what they are owed.\nIf the negotiations succeed, the debt settlement company charges you a percentage (20% to 25% is common) of either the amount it saves you or of your total debt. Debt settlement accounts often charge additional fees as well (for setting up and maintaining your savings account, for example). END