With the declining state of the current economy, more and more individuals are turning toward debt settlement as a means of eliminating their mountains of debt. Debt can cause stress and an overall decline in health. Creditors calling at all hours of the night even bothering you at your place of employment, no wonder many consumers reach a level of extreme desperation, even depression. Is there a light at the end of the tunnel?

There are many debt settlement companies that are completely legitimate. A debt settlement company will review your loans, your income, and assets, and determine a realistic level of payment for each debt you owe. They will then contact each creditor and negotiate a payment plan that's realistic.

Once you've made the lump sum settlement with your creditors you're out of debt. Debt settlement companies don't work for free. The fees can be based on a percentage of your loans, a set up fee, payment fees, and even closing fees.

Unfortunately, there are many debt settlement companies that are only after your money and have no intention of working with you or your creditors.

These companies exist only to bilk service fees out of desperate consumers who see no other way out. Instead of a light at the end of the tunnel there's only a brick wall.

They promise to contact your creditors in effort to lower your current balance and reduce your current payments as much as 50% or more. While legitimate debt settlement companies typically negotiate your balance scam companies offer empty promises, take your money and run!

One debt settlement scam that is gaining in popularity is the no hassle enrollment plan. This occurs when the company in question wants you to enroll in one of their plans over the phone, without any type of qualifying process or verification of your actual debts. Of course you have to pay a membership initiation fee and, most likely a monthly fee while they review your finances. If you decide not to continue in the program, too bad, there aren't any refunds.

Another popular debt settlement scam is one in which the company tells you that your creditors have agreed to the repayment plan and they haven't even been contacted. Or the settlement company has sent a letter to the creditor telling them the payments are being held in a trust account and have to reach a certain balance before they'll be paid. The consolidation company comes up with a monthly payment that the consumer pays them every month. A good chunk, as much as $50 to $100, goes to the settlement company as service fees. The money is held in a "trust" account until the balance reaches a certain level.

The consolidation company then pays the creditor. But if the creditor hasn't agreed to this plan, and most won't, they can continue to collect on the debt through whatever means legally available.

This type of plan could only make matters worse, because most creditors will not wait that long to receive full payment. In all likelihood, they could still take you to court.

Be aware that debt settlement is not the same thing as debt consolidation, or debt counseling.