When you find yourself swamped with bills charging astronomical interest rates and in real financial difficulties, you have three options (short of winning the lottery) for reducing and managing your debt burden.
Debt consolidation is one approach that you may have heard a lot of talk about; and while it is an effective solution for some, the better interest rates required are usually only available to those with sufficient collateral (such as a house) and a fairly good credit history. If you don't own property, or have had a hard time keeping your credit history clean while trying to pay one too many bills, you're probably out of luck.
On the other end of the spectrum is bankruptcy, a drastic measure involving court proceedings and the liquidation of non-exempt assets. While the thought of 'wiping out' ones debt is certainly tempting there are many long-term consequences, not the least of which your ability to get credit in the future. Recent changes to bankruptcy laws have also made it difficult for all but those in the most dire circumstances to apply. Definitely a last resort.
Debt negotiation is the process of negotiating with your creditor(s) to achieve what's called a debt settlement. A settlement is when a creditor agrees to take less than the full amount owed and closes the debt (they settle for less.) It's better for the creditor than bankruptcy, as they still receive at least partial payment on what's owed. As for how it effects your credit report, debt negotiation lies somewhere in the middle. There is some effect to your credit, so from that perspective it's preferable to consolidate; but it's nowhere near as detrimental to your long term finances as declaring bankruptcy.
How Do You Negotiate Your Debts?
While it's certainly possible to represent yourself in debt negotiations, most people choose to enlist some help rather than deal with it alone.
As you probably already know, dealing with creditors can be a stressful situation, and experts have the added advantage of experience in dealing
with the matter, which can result in better settlement terms.
If you're looking to pursue debt settlement as an option, you can locate a local attorney who specializes in arbitration, seek help from a credit counselling service, or you can find some recommended negotiation services right here at online debt negotiation.