When your credit card bills are piling up and you have little hope of ever paying them down, debt settlement — hiring an outside firm to negotiate discounts with your creditors — can feel like the only choice. Here are five questions to ask before you sign up for a debt-settlement plan.

How much will I pay?

People who complete a debt- settlement plan typically end up paying 65 percent to 80 percent of the amount they owed when they enrolled, said Steven Boms, an adviser to the American Fair Credit Council, a debt-settlement industry coalition. You can eliminate a fee if you negotiate with creditors, and some creditors encourage consumers to contact them directly before enlisting a third party.


Will this take care of all of my debt?

Consumers who complete a debt-settlement program typically finish in two to five years, Boms said. Debt-settlement companies require that you open an account where you deposit money to be allocated toward settlement.

Completing a program can be difficult. The Fair Credit Council reports that just over 50 percent of accounts enrolled in debt settlement at the start of 2013 had been settled by March 31, 2017.

Will my creditors negotiate?

Policies on dealing with debt settlement companies vary. Some, like Bank of America and Capital One, will negotiate with the customer’s consent; some, such as American Express, say they won’t negotiate with debt-settlement companies.

A debt-settlement company can still settle your debt if the original creditor won’t negotiate. They just have to wait until after the issuer writes off your debt as a loss.

What’s the impact to my credit score?

When you sign up for debt settlement, you stop paying credit card bills, which can trigger late fees that only add to your balance. That doesn’t matter much if the debt gets settled, but what if it doesn’t for some reason? You will owe that bigger credit card balance, according to the Center for Responsible Lending.

Meanwhile, even one missed payment will hurt your credit, and a charge-off will damage it even more.

Is debt settlement better than other options?

Consider all options, including Chapter 7 bankruptcy. Other alternatives include debt-management plans, credit counseling or directly negotiating with your creditors. Consider consulting with experts, such as bankruptcy attorneys or credit-counseling agencies, to understand how each option works and determine what makes sense for you.