Debt Management v. Debt Settlement: What’s Best for You?

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(Memphis) It sounds like the perfect plan to get rid of all those credit cards.

"When you talk to them, they say don't pay your bills," says Ernie Parrish.

Plus, finding help to get out out of debt is right at your fingertips. A quick Yahoo search pulls up several numbers for so-called Consumer Credit Counseling in Memphis.

However, Parrish of Consumer Credit Counseling Service, says those lines don't connect to his office.

"It's some sort of Florida, for-profit organization," he said.

Confusion about where to turn for money help is one problem, the other is finding a plan that's right for you. Companies like the one Parrish says is based out of Florida offer what's called debt settlement.

Typically run by for-profit groups or attorneys, they'll negotiate a pay-off with your credit card company. Consumers send payments, and the money goes into an account until enough builds up to negotiate a deal.

The downside is that while you're waiting for that balance to grow, the bills keep coming.

"You're not paying Chase, so Chase says what's up, and they take you to court and garnish, and successfully garnish your wages," explains Parrish.

Consumer Credit Counseling and other non-profits offer what's called debt management.

"I'm lowering the payment, and I'm lowering the interest rate, and we get all of our folks paid within five years," Parrish said about the process.

There's still a monthly fee and you're also paying through an agency, but your payments immediately go toward your bills.

Bottom line, it's important to understand what you're getting into, so it doesn't cost more in the long run.

Experts say consumers should also be careful about responding to ads and should ignore cold calls to their house.

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