Earlier this week I saw a segment on the Today Show talking about the risks of debt settlement, and the horror story from a woman who was ripped off. So I started thinking, "why do so many people think debt settlement is nothing more than a scam?"

Sadly, the answer is obvious.

But equally sadly, it is a real, honest, viable option for some people in debt. In fact, I used debt settlement several years ago and it saved me from financial ruin do to a bad business idea.

So debt settlement is not a "scam" all by itself. The scam is those companies who are "bad apples" as described in the video.

So why is it that nearly all the publicity for debt settlement is negative?

Two reasons:

1-Companies who are not legitimate
2-Consumers who are not well educated (yes, consumers deserve some of the blame)

Let's start with #1. Are there any legitimate companies? Yes, of course. (Here are 2 settlement programs with great track records of excellent customer service.) Are there scammers? Yes!!! Just like in any business, some companies are just out there to make money, whether or not they actually help you. The key is figure out the difference BEFORE you get sign up and end up feeling ripped off.

How can you determine if a debt settlement company is legitimate?

• Check BBB records. This is very easy to do. And don't just look at the letter grade, find out how many complaints have been filed. Any more than a handful and move on to the next company.

• Ask for references. Any company that does a good job can give you references.

• Don't sign anything unless you read AND understand it. This is a "no brainer" and the most important thing to remember. Don't trust what the salesperson or debt counselor tells you. Read for yourself, and ask questions if you don't understand.

What about #2. Why are consumers to blame for some of the bad press about debt settlement?

• People DON'T do any research or shop around. There are HUNDREDS of settlement programs out there, so keep looking until you find a good one.

• If the ads sound too good to be true, then they usually are!

• People DON'T realize how debt settlement really works...

So, how does debt settlement REALLY work?

1. You must be behind in your payments. If you're already behind, then you're a good candidate for settling your debts. If not, you must stop paying. If you can pay, then pay. If not, consider stopping payments to get the leverage needed for a settlement (why would any creditor give you a discount on your balance if you are paying your bills???) You MUST KNOW THIS ONE FACT or else you'll just end up being another horror story!

2. Your creditors will call you even if you've hired a company to settle your debts. A good settlement will help you with this, and teach you what to say. DON'T ignore the calls, as this will only make things worse.

3. Your credit will take a big hit. For some people, having lots of debt is worse. And good credit is meaningless if you are drowning in debt. But your credit score will be lowered (although there are legitimate ways to repair your credit, but that's for a later discussion).

4. You must have a sum of money to pay the settlements. Some companies will help you start a savings account for this purpose. Others require you to find a way to come up with the money. If you can't come up with a lump sum, don't use settlement until you can!

5. It is a stressful process. There's no way around it. But if you know how it works and have found a quality company to help you, you WILL get through it!

Unfortunately, those companies out for a quick buck don't care if their customers know what they're getting into. So it's up to us as consumers to know what we're buying. For some people, debt settlement IS the RIGHT solution. And if they do a little digging, they WON'T get ripped off!

What do you think about debt settlement?