FAQ

What is debt settlement?

Debt settlement (also called debt negotiation) is a process of negotiating with your creditors to pay off your credit cards and other unsecured debt (student loans, auto loans, and home mortgages are secured debts, and don’t qualify) for an amount less than you currently owe, often at a 40-60% savings. You will need to be behind in your payments in order to gain the leverage needed to get the creditors to settle your debts at a reduced amount (if you are making your payments on time, creditors won’t want to give you a “deal”). Typically you will pay the settlement company a percentage of the savings.

Does debt settlement really work?

Yes it does. Debt settlement works best for people who cannot pay their bills, are behind in their payments, or are considering bankruptcy. It is not designed for consumers who have small amounts of debt or who can still make their payments. It is a more aggressive approach to getting out of debt, and is not right for everyone. But debt settlement is a proven method, that does work (and worked very well for me personally).

How is it different from debt consolidation or credit counseling?

Debt consolidation or credit counseling is a more traditional debt reduction option, which lowers your interest rates, monthly payments, and fees, but does not directly reduce the amount you owe. However, debt consolidation can help you get out of debt faster by lowering your interest rates and helping you pay more each month towards the amount you owe, and pay less in interest. Unlike with debt settlement, you do not need to be behind in your payments to use debt consolidation or credit counseling (although you can be).

Will debt settlement ruin my credit score?

A credit report lists your payment history and amount of debt, so debt settlement is noted on your credit report, and can lower your credit score. However, many people don’t realize that having a lot of debt also lowers your credit score. And with very high debt, many lenders won’t lend you money (which is one reason to have good credit in the first place) and you may not be able to afford to borrow more money (another reason to have good credit) anyway. So, when considering debt settlement, make sure to compare the benefits (getting out of debt faster & saving lots of money) against the against the drawbacks (lowering your credit score). For me, getting completely out of debt and getting my life back to normal was well worth it.

Can my credit be repaired after I am done with debt settlement?

Yes it can. You have the right to request than any information be removed from your credit report. All information must be verified correctly, or the credit bureaus must remove it from your credit report.