It's a place no one wants to find themselves -- bills piling up, necessities getting more expensive to buy and you find yourself not having enough to get by.

That's where debt settlement could help -- an agreement set up between your creditors and you, managed by a credit counselor or debt settlement manager that pays off your debt.

To protect consumers from less-than-honest business deals that would bilk you instead of help, Pennsylvania has established laws to govern such agreements.

A Widespread Issue

Money woes are more common that you might think. In a 2012 survey, about one in five adults in the U.S. said they don't have a good idea of how much they spend on housing, food and entertainment, according to the National Foundation for Credit Counseling.

What's more, less than half of those surveyed said they had budgets or kept a close eye on their spending. Another one-third of Americans -- that's about 77 million people -- don't pay all of their bills on time.

When faced with increasing debt or other financial problems, the survey found 27 percent of Americans would turn to family and friends first for help. Another 13 percent said they would approach their lender or credit card company to see what solutions it could offer them.

That's also where a debt settlement would come in.

Companies Need To Meet These Requirements

Licensing Requirement

To provide debt settlement solutions in Pennsylvania, a company must be licensed through the state and needs to follow the state's guidelines for accreditation. That means the company or person has to be certified through an agency acceptable to Pennsylvania.

Once licensed, the person or company needs to file annual reports on the business they do in the state.


Before getting a state license, the person or company also needs to maintain a bond that is greater than all the money it might hold as part of debt settlement agreements. Companies set up bonds through surety companies as a way of safeguarding investments or fund entrusted to them.

In other words, the bond would guarantee the money a consumer would pay to the debt settlement manager or credit counselor as part of a debt settlement. The bond is there so the consumer won't lose any money paid in to the company.

Allowed Fees

While a debt settlement company may deduct fees for its services from what a client pays in to it, those fees have to be stated before an agreement is signed by the consumer.

Pennsylvania mandates the explanations of the fees be in "plain English" and easily understandable.

Weigh the options

Before agreeing to hire a debt settlement or management company, Pennsylvania requires the company to analyze the consumer's financial situation and prepare a budget for the potential client. If debt settlement isn't the best option, the company is legally obligated to tell the consumer and not offer that service.

Debt settlement can be a way to place yourself on stronger financial footing and should be carefully considered as an option.