Dear Debt Adviser: I recently turned over my credit card debt of $50,000 to a debt management company that promises to have me debt-free in 30 months. I am paying $602 for the first six months, then $915 for 24 months (which goes into an account to pay the creditors).

The creditors continuously call, and I do not answer the phone. Should I answer and tell them I have a debt management professional handling the debt? I do not use the credit cards anymore, and I am sure they will be canceled soon. I know this will ruin my credit, but I just want to be debt-free. — Kay

Dear Kay: I wish I could tell you that this will hurt me more than it will hurt you, but I can't. Still, it is best to be clear, and what you have told me so far is anything but clear! Here's my take based on what you have told me.

You are working with a debt settlement company, not a debt management company. The payments you are scheduled to make total just more than half of what you owe in credit card debt. A company that was helping you manage your debt on a debt management program would immediately begin making payments directly to your creditors, and you would pay the full amount owed over time based on a budget that works for you.

It appears that you have been signed up for a program you don't understand. In addition, several other things concern me about your letter.

The first is that creditors are continuing to call you. Better debt settlement companies employ attorneys who notify creditors on your behalf that all communication regarding your debt must go through the attorneys. When a debt settlement company takes this action, it removes some of the pressure from you because you no longer have to deal with daily calls from creditors. However, if you are still getting calls, this has not happened.

Second, the wording of your letter indicates that the first $3,612 of payments will go to the company as an up-front fee for services. I worry about giving anyone money with nothing to show for it.

My guess is the fees are fully or partially nonrefundable. Because you owe a significant amount, it is unlikely that your creditors will simply charge off the debt owed and forget about it.

Instead, it is much more likely your creditors will seek legal action to collect the debt. This usually takes about 180 days — right around the time your six months of nonrefundable payments will be in the settlement company's account. What an amazing coincidence!

Depending on your state's garnishment laws, you could be facing wage garnishment long before you have paid enough to the debt settlement company to settle your debts. I recommend that you ask the company how things would be handled if your creditors decide to take legal action.

Third, if all goes well and you stop receiving phone calls and are not taken to court, you still will face one big, honking tax bill. Should your debt settlement succeed, you will receive a Form 1099 from your creditors reporting to the IRS the amount forgiven on your debts as income.

In your case, you would be adding more than $25,000, plus fees, interest and other charges, to your year's taxable income. At a tax rate of 25 percent, you would owe an added $6,250 in federal taxes, plus any state haircut that may be applicable.

You'll want to be sure that you have the money handy to pay the IRS, because it does not like to settle for less than you owe, since it can seize subsequent tax refunds or a chunk of your Social Security.

Before you send them any money, I recommend that you read over any agreement you signed with this company to be crystal clear that you understand what you are getting into.

— Steve Bucci is president of Money Management International Financial Education Foundation. Visit http://www.moneymanagement.org for additional debt advice. If you have a question for Steve, e-mail debtadviser@bankrate.com.