Great question. It sort of depends on what the individual's goal is to do.

For example, I see some benefit to this type of service if the individual wants to avoid bankruptcy or can't qualify (or doesn't want to do) Chapter 7 and maybe would be in 100% Chapter 13 plan where the payment would be too high.

If someone goes this path, I would say to look at 4 things:

1. What percentage fee do the firms charge. Most firms charge 15-25%, but that is a HUGE range.

2. What are the BBB complaints and negative Google / Yelp reviews. Basically, try to find unbiased review sources. Oftentimes, people will look up debt relief and see an ad for top debt relief firms, click on that, and then just choose one-off that page. The challenge with that is that the top result on Google may be an ad, which they pay for, so it may be quite a bit more biased toward firms that spend a good amount of time on PR.

3. Understand whether the banks you owe money to are likely to sue you for unpaid debt. Too often debt relief firms don't seem to tell these to people, and it's a negative experience to get a debt collection lawsuit.

4. Understand whether you can avoid paying taxes on debt settlement legally by being tax insolvent. This is another thing I wish debt settlement companies were upfront about.

Alternative to debt settlement:

1. Yeah, budgeting better can help if you have some expenses that don't bring you benefit that can be cut easily. Some people have done this and still have no room.

2. Getting a side hustle to increase income could be helpful, but some people just don't have the time to do this.

I'd probably prefer these options as your credit score may stay intact.

If you can't do these, the common alternatives to debt settlement would be nonprofit credit counseling and bankruptcy.