Debt ratios for consumers across the country are at historic highs in terms of debt versus income, as a percentage of the Gross Domestic Product, and as a result, a record number of consumers are seeking debt relief in the form of debt settlement, debt consolidation, debt counseling, and bankruptcy. As traumatic as going through any of these processes from start to finish can be, many consumers end up right back where they started, facing a huge debt load with monthly payments that are again out of reach. Having been buried with the burden of debt once, how does it happen that these consumers end up in the same predicament? Three behaviors typically put consumers back in harm’s way.

I’m glad that’s over! – Letting a little complacency sneak in is natural once the debt settlement process begins. Collection calls are less frequent, there is only payment to make, and there might even be a little money left over at the end of the month. Relaxing a little is definitely permissible. It’s a mistake to get carried away however. A consumer taking the attitude that "it’s over" can fool himself into the belief that it was all temporary and there is no need to change all those bad spending habits, when nothing could be further from the truth.

Whew! We just dodged a bullet. Let’s party! – In a debt settlement, a consumer’s credit card payments are reduced by around 50% per month. If that struggling consumer was managing to stay current on the credit card payments right up to the beginning of the debt settlement, the reduced payment means that the consumer will have extra money in his or her pocket once the settlement is in force. Logic would have it that the consumer should put that extra money in a savings account or apply it to other debts but those actions would require the changes mentioned in the first bullet point. Instead, many consumers begin consuming again. If part of that consumption is to make up for lost time, the party is on and trouble is not far away.

What, I worry? – No budget, no plans to save anything, and continued spending at levels that can’t be managed. All the issues that put the consumer into debt settlement in the first place are in full force again. The discipline required and the changes that should have been made never quite materialized and the effort and the opportunity to get back on solid financial footing have been lost.

For consumers struggling with the burden of too much credit card debt, a debt settlement can provide the opportunity to rebuild and gain control of their finances without going through a bankruptcy. The settlement process, however, is only half of the formula and a temporary one at that. Consumer behavior and spending habits have to change as well or all the effort of the debt settlement will go for naught. Fortunately, the needed changes are not difficult but they do require a level of discipline and commitment. For a lifetime of financial freedom, that discipline and commitment can go a long way.