• Know the rules before settling a debt.Debt concept - cutting a credit card image by Sophia Winters from Fotolia.com
  
  

As Soon as Possible

• Debt expert Gerri Detweiler, author of "The Ultimate Credit Handbook," notes that creditors would rather settle a consumer's debt than not be paid at all because you filed bankruptcy. The longer you wait to settle a debt, the harder the hit on your credit score. Settle a debt as soon as financially possible to avoid damage to your credit.
  
  

Statute of Limitations

• The statute of limitations regulates the amount of time a creditor has to take legal action against you for a debt. Edward Jamison, of the Jamison Law Group, advises against settling a debt beyond the statute of limitations. If the statute of limitations has ended, a creditor cannot sue you or garnish your wages; however, they can use other methods to gain payment. Be warned, any payment you make resets the statute of limitations clock.
  
  

Bottom Line

• Edward Jamison advises consumers to settle for as little as possible, "It's better to save 50 cents on the dollar and lose a couple points off your credit score by having a settlement as opposed to 'paid in full' because the collection and the charge-off notation is what's hurting the account."