Those who are having problems handing their debts in Arkansas may be interested in learning about their options. Some individuals might seek help from a credit counseling organization and others might try to work with a debt settlement company. It may be beneficial for readers to understand some of the differences between the two types of organizations.

Debt settlement companies are typically for-profit companies that attempt to use a lump-sum payment of less than the outstanding balance to settle the account between the creditor and debtor. These companies might also ask the debtor to stop making any payments to the lender. However, these attempts to settle the debt do not involve up-front agreements with the creditor that bar the creditor from pursuing full repayment from the debtor. This may result legal action filed by the collector.

Credit counseling agencies tend to take an approach that seeks to reorganize rather than forgive the debts. Most of the time, these organizations, which tend to be non-profit entities, seek to reduce monthly payments to manageable amounts by extending the period the individual has to repay the account. There may also be a chance that the counseling agency could reduce the interest charged by the creditor.

While both of these options might provide some debt relief, those who are facing unmanageable bills might consider filing for bankruptcy instead. Bankruptcy protections may provide protection from creditor harassments and could be the first step to reestablishing one’s financial foundation. Those who are interest in filing for bankruptcy might discuss the possibility with an attorney who is familiar with such actions.

Source: Consumer Financial Protection Bureau, “What’s the difference between a credit counselor and a debt settlement company?“, January 03, 2015