If credit card bills are piling up and you want a way out, you have got to be tempted by those ads that say:

• "Our debt settlement plan can reduce your debt 55%-70%!"
• "Reduce Your Debt by 60% Debt Settlement Guaranteed!"
• &39;Settle your debts & save up to 75% of what you owe"

Sounds great! Where should you sign up?! Not so fast, advises Jim Young, the CEO of  Accelerated Debt Consolidation. According to Jim, debt settlement, or debt negotiation as it is sometimes called, is never a good option for cardholders who are current on their accounts and want to maintain their good credit.

"The only time that a settlement makes sense for a consumer is when they need an account settled in order to obtain a new line of credit. For example, if a consumer that had good credit was attempting to obtain a mortgage but they had an old charged off account on their credit report, settling the charged off account could be what the new lender would need before approving the mortgage."

What They Don’t Say
One of the many things those enticing ads don&39;t point out is that debt settlement can only occur after the accounts are charged off. And if you do choose the settlement option, it will actually prolong the time the charge-off remains on your credit report! For example, say you initially owed $10,000, and a card issuer charged it off. Four years later, a debt settlement firm negotiates a reduced payoff amount of $5,000. Not only will that get the clock ticking on your credit report for another seven years, but as Jim puts it,

"You will pay income taxes on the amount that the creditors let you off the hook on. In other words if a creditor settles a $10,000 debt for $5000, the $5000 is reported as income and you will be taxed on it."

Ouch! In fact, according to law, you would be taxed on any amount forgiven over $600. Ka-Ching! These debt settlement firms are often nothing more than telemarketing scam outfits, except that their operators&39; scripts talk about credit as opposed to some widget. Once someone falls for their sales pitch, they start making money right away, first by collecting a "retainer." They pocket the first few months&39; payments a consumer is required to send in -- which of course only gets the consumer further into hock and credit trouble … faster. Then these debt settlement outfits make a percent of what they save the cardholder. Here&39;s an example Jim likes to use:

"If the client owes $100,000 and the settlement firm is promising to save them 50% of what they owe, that is a savings of $50,000 and they usually want a commission of 12%. So 12% of $50,000 is $6000."

And you thought the MasterCard or Visa in your pocket had high fees! Seriously, though, as I hope I&39;ve made clear, debt settlement has some serious pitfalls. If you are having trouble paying your bills, I urge you to visit the Accelerated Debt Consolidation Web site, and take a look at some other options that might be more appealing to you. Got any horror debt settlement horror stories? Please share them with us!

Curtis Arnold, is the Founder of CardRatings.com, a website that provides ratings and reviews of over 20,000 credit card offers.