California residents who are dealing with overwhelming debt are often looking at a number of solutions to find some relief from the drumbeat of creditors’ calls. Some of them might consider the services of a debt settlement company.

In the past, the largely unregulated industry often charged high fees yet failed to obtain any meaningful debt relief for their clients. However, today, debt settlement companies are subject to an increased number of regulations and can be expected to deliver on their commitment to persuade creditors to accept a lower payment and forgive some of the debt.

Sometimes, however, people getting engaged with the debt settlement process may not understand all of the factors that can contribute to a successful or unsuccessful settlement. For people already struggling with difficult financial times, this can be particularly challenging and even damaging to their financial futures. For example, credit scores can decrease when debt is written off in a settlement, and some participants may not understand that they may be subject to taxation on forgiven debt. Other clients may end up with more complex debt problems as settlement negotiations can drag out while they continue to save to pay for an eventual agreed-upon lump sum.

Many people opt for debt settlement due to fears about bankruptcy. They may be concerned that they will lose their possessions or that bankruptcy will produce a stronger negative effect on their credit score. However, bankruptcy can often be a quicker and more reliable process, cause a greater reduction of debt and have around the same negative credit impact as debt settlement.

People struggling with major financial problems might want to meet with a lawyer to learn more about the available options, including filing for personal bankruptcy. There are several eligibility and other requirements that the attorney can point out.