American Fair Credit Council. Gerri Detweiler. Federal Trade Commission. Internal Revenue Service. Accessed June 15, Consumer Financial Protection. United States Courts. Center for Responsible Lending. Debt Settlement. Consumer Affairs. Debt Management. Building Credit. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data.
We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Part Of. Understanding Debt. How Debt Affects Your Credit. How to Get Out of Debt. Debt Management Resources. Table of Contents Expand. What Is Debt Settlement? Debt Settlement Strategies and Risks.
Debt Settlement vs. These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Part Of. Understanding Debt. How Debt Affects Your Credit. How to Get Out of Debt. Debt Management Resources. Table of Contents Expand. The Basics of Debt Settlement.
The Downsides of Debt Settlement. Should You Do It Yourself? Appearances Matter. The Negotiating Process. The Bottom Line. Key Takeaways Debt settlement is an agreement between a lender and a borrower to pay back a portion of a loan balance, while the remainder of the debt is forgiven. Keep in mind that not all creditors will agree to a debt settlement.
Stash some cash. This is because most will want a lump-sum payment, although some may be okay with dividing the dollar amount into monthly payments. Get ready to negotiate. Contact the creditor.
With your offer in hand, call the creditor. You may need to call several times until you end up speaking to someone sympathetic to your situation. Put it in writing. Once you and the creditor have agreed to a debt settlement, be sure to get the details in writing. This will help protect you in case problems come up later. Pay the money. This may give you an edge in your negotiations. If you do enter a payment plan, ask whether the creditor will lower the interest rate on the debt to ease your financial burden.
During your negotiations, maintain a written record of all your communication with a creditor. Last but not least, keep your cool and be honest. In some cases, a creditor may have turned your debt over to a debt collector. Debt collectors make money by collecting past-due debts that originated with a creditor, such as a credit card company.
When dealing with debt collectors, be patient. Also, ask about whether the debt collector is willing to settle the debt through a payment plan rather than all at once, with one lump-sum payment. DIY debt settlement negotiations almost certainly will consume a fair amount of your time and energy, and it could take a while to reach an agreement.
The original creditor is likely to be looking for a higher percentage repayment. You may be able to get faster results with DIY debt settlement. While completing a plan through a company can take two and a half years or more, you may be able to settle your debts on your own within six months of going delinquent, according to debt settlement coach Michael Bovee.
Debt settlement companies also can have inconsistent success rates. The Consumer Financial Protection Bureau has logged more than complaints against debt settlement companies since Among the most common issues were fraud and excessive fees.
The Florida-based company agreed to effectively shut down its operations, according to a court order. If you decide to negotiate with a creditor on your own, navigating the process takes some savvy and determination.
Answer these questions to decide whether DIY debt settlement is a good option:. Have you considered bankruptcy or credit counseling? Both can resolve debt with less risk, faster recovery and more reliable results than debt settlement. Are your debts already delinquent? Many creditors will not consider settlement until your debts are at least 90 days delinquent.
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