The credit card settlement procedure sounds like this: you stop paying your credit card bills. Later, the money you’d normally have paid to your credit card companies goes to a special savings account, typically handled by a debt settling agency. When your credit card bill is about to end, the debt settling agency contacts your credit card companies again and suggests to them a settlement. Your credit card companies agree to the proposal–they’d rather get some money rather than not receive any money at all from you. Then the credit card companies send you a check to cover your late payments.

This is a simplified version of the credit card settlement process. You’re paying a fee to someone else. And, in this case, “that someone” is the credit card settlement companies. They get to keep a portion of the money from the money they save on your late payments. That’s why it’s called a “service fee.”

Why would anyone want to do that? There are numerous good reasons. The first is that the credit card settlements don’t need you to keep paying them. If you stop making payments, you don’t owe the money to the debt settlement company anymore. If you don’t want to pay the fees, you don’t have to. It’s almost as if you’re getting double-charged.

But, if you’re not thinking about bankruptcy, then the credit card companies won’t be interested in going through the expense of negotiating a settlement. And even if they do agree to negotiate, they won’t do it for free. They’ll only accept very low payments. If you can come up with more than half of what they want, you’ll likely negotiate an even larger settlement because the negotiation process will be longer and drawn out. The credit card company will be very interested in collecting the remainder of your balance quickly because that’s their business.

The bankruptcy option, though, is often the best way for credit card settlement processes to work. If you file for Chapter Seven, your creditors will be able to sue you for not paying your outstanding balance. If you file for Chapter Thirteen, your outstanding balance can be sold to a collection agency. Collection agencies buy debtors’ unpaid balances for a lot less than the balance actually owed. (Many collection agents will try to contact you via snail mail.)

That’s where your bankruptcy can come in handy. Your credit card debt settlement company can contact your creditors and offer a settlement amount. You can then pay the company the settlement amount in monthly installments or in one big lump sum payment. Your creditors are happy because they at least get a percentage of what is owed.

Your attorney can also help you prepare your credit card settlement agreement and get it filed. (Should you decide to use an attorney, make sure he or she is a good fit for you and your needs. You’ll want to spend some time with them discussing your finances and the details of the settlement; an attorney who does this sort of work on a regular basis is in an excellent position to save you time and money. An experienced attorney will also be familiar with the Fair Credit Reporting Act and can advise you on any problems that might arise during the process. In fact, he or she will probably be the first person to let you know if anything comes up during the process-if it’s not to your benefit, for example, filing for bankruptcy would hurt your credit score more than settling with your creditor and getting a lump-sum payment would be better for you financially.)

It’s important to remember that settlements for credit cards are not the only option you have. You can choose to go to court to force the issuer to accept a settlement, and you can use other options like loan modifications and payment programs. The important thing is to understand the options available to you and how they’ll affect your finances and your credit score.