There are some disadvantages to debt settlement that should be considered prior to entering any type of debt settlement program. The first disadvantage is that there may be tax consequences to settling the debt for less than its full value. The second disadvantage is that the industry is loosely regulated. Until recently, almost anyone could say they were a professional debt negotiator, regardless of their actual experience or credentials. So if you choose to go down this path, I recommend that you hire an experienced debt settlement attorney to work out a program for you.

Another disadvantage of debt settlement is that it will not work for every kind of debt you may have. It is an effective solution for unsecured debt, such as credit card debt or lines of credit, but it can’t solve every debt problem. Finally, debt settlement will adversely affect your credit rating.