Looking for an easy way out, thousands of consumers have found themselves in a fate worse than debt.

The debt settlement industry has flourished during the recent recession. And since the recession began in late 2007, the Better Business Bureau has received more than 3,500 complaints about debt settlement firms nationwide.

With those companies, many of them ask for upfront fees so the company can negotiate a settlement with creditors for less than what is owed. During this process, which could take up to a year, the consumer typically makes no payments to creditors.

That would put the consumer at risk for wage garnishments, legal actions and damaged credit ratings, says Ken Lin, founder and chief executive officer for Credit Karma, a California-based credit advocate and scoring website.

"If you use debt settlement services, you are in a downward spiral — your access to credit gets worse, your interest rates go higher," Lin said.

Not all debt settlement companies will exploit you, said Dwight Kealoha, chief executive officer of Hawaii’s BBB. He advises seeking help from a nonprofit credit counseling service, the kind that won’t ask for exorbitant upfront fees to help you. Oftentimes, the guidance will come at little or no cost.

You can find credit counseling centers via the National Foundation for Credit Counseling at www.nfcc.org. The site offers three locations by the Consumer Credit Counseling of Hawaii — in Honolulu, Hilo and Wailuku.

Complainants to the BBB allege that they were driven deeper into debt and sometimes sued by their creditors — adding legal fees — and had their wages garnisheed. Some complainants decided to not proceed with the process with the companies, but were not returned the money set aside for debt settlement.

Some consumers have taken legal action against the companies. State attorneys general have taken action against companies like Debt Settlement America, Debt Rx USA, Financial Freedom of America and Credit Solutions.

Many mainland companies are reaching out to isle residents through the web, Kealoha said, and it’s important for people to sniff out exploitative practices.

Hawaii has the second highest average credit-card debt per consumer out of the 50 states, with about $9,200, according to Credit Karma’s first-quarter report. Only Colorado beat out our state, with about $9,225 per consumer.

"High upfront fees is one way of finding out if someone’s not on the level," Kealoha said. "Sometimes they make promises that are too good be true."

One of these promises include saying that your debt will be reduced by more than half, before even looking into your papers and how deep your debt is.

Claims of a fast and easy process are also red flags. If you’re in need of debt settlement, you’ll likely need years to catch up.

"Even when they do advertise, they’re not disclosing some of the pitfalls of their services," Lin said.

The best person to help you get out of bad debt, Lin says, is yourself.

"It’s a matter of discipline and planning," he said. "If you put a plan into place, rather than making a mountain out of a $25,000 debt, knock off $700 a month and you can get there over a course of three or four years."

As opposed to the downward spiral, Lin says managing your own finances would find you with better spending habits, improving credit scores because of the timely payments, and better interest rates as a result.

Kealoha recommends working with your lender to create a payment plan.

"What we find here in the islands is that financial institutions here will help their clients through the process," Kealoha said. "That’s why we recommend to folks who are overextended to go to the lender first. At the end of the day, you’re going to have to deal with them anyway and find a solution that’s acceptable to them."

It’s a long process. I’ve had friends who have spent half a decade making payments. But as they’ve said to me, there truly is life after debt.

"Here’s the Deal" helps consumers stretch dollars in these tough economic times. It runs every other Monday. E-mail Gene Park at gpark@staradvertiser.com.