Debt Settlement Can Help You Achieve Financial Stability if You:
Debt settlement can help you regain financial stability when unsecured balances have grown past what your monthly income can realistically cover. It may be a fit if you:
- Have overwhelming monthly credit card and loan repayments
- Want to get back on financial track
- Cannot afford to pay what you owe
- Have unexpected medical bills
- Want financial freedom
- Need a fresh start
How It Works
Debt settlement works in three stages, and each one builds on the money you set aside each month rather than on new borrowing.
See Your Savings
See how much money and time you can save by speaking with one of our debt relief specialists.
Enroll Into Program
Work toward resolving your enrolled debts through the program, which most often runs 24 to 48 months. Individual results vary.
Get Relief
Get your financial freedom back and begin a new future.
What is Debt Settlement ?
Debt settlement is a debt reduction program that works by the client setting aside a set amount of money each month into a specialty savings account. The amount you save each month is determined during your consultation and is based on the total amount of debt you enroll.
As your savings builds, your creditors and/or collectors are worked with to reach agreeable settlements on each of your accounts. This process repeats until you are debt free at a reduced amount.
Some examples of financial circumstances where it may be good idea to consider debt settlement are:
- Struggling to make minimum payments
- Unexpected medical expenses
- Behind on your minimum payments
- Job loss
- Considering filing for bankruptcy
- You do not have the money to pay what you owe
How Does Debt Relief Work? Assessment, Account Management, Negotiations & Settlement
Debt relief moves through distinct phases, and you stay in control at each one: nothing is enrolled, negotiated, or paid out without your approval.
Debt settlement works in three phases.
- Consultation. Speak with a debt relief specialist to confirm that a settlement program makes sense for you. Every situation is different, so the specialist reviews which of your debts qualify for enrollment.
- Monthly deposits. If your debts qualify, you set aside a fixed amount each month in a dedicated savings account. That deposit is typically lower than all of your current minimum payments combined, which frees up cash flow right away.
- Negotiation and settlement. BBB Accredited, A-rated in-network providers use those funds to negotiate your balances down with your creditors. When a creditor and the negotiators reach an offer you approve, the settlement is paid from your account and that debt is resolved for less than the full balance.
Debt Settlement FAQ
How does your program work?
After you enroll, you deposit a fixed amount each month into a dedicated account. The deposit is set during your consultation and is based on the total debt you enroll.
As the balance builds, negotiators from the program’s in-network providers work with your creditors and collectors to reach a settlement on each account. You approve every settlement before it is paid. The process repeats until each enrolled debt is resolved.
Who qualifies for the program?
Settlement programs are designed for people in financial hardship who are falling behind, or struggling to keep up, on unsecured debt. Most programs require at least $10,000 in total unsecured debt and a balance of at least $500 with each creditor.
How long does the program take?
Most programs run 24 to 48 months. The length depends on how quickly you can build the funds needed to pay each settlement. Any timeline is an estimate, not a guarantee.
Are the service fees paid up front?
No. Under the FTC’s Telemarketing Sales Rule, a debt settlement provider cannot charge a fee for an account until it has settled that debt, you have agreed to the settlement, and at least one payment has been made to the creditor under it. Fees are collected account by account as each one settles.
Do I have to include all my accounts in the settlement program?
No. Some clients keep one small credit card open for emergencies. A United Debt Relief specialist can help you decide which accounts to enroll during your consultation.
Will I be totally debt free after the program?
The goal is a settlement on every account you enroll, though results vary. Debts you do not enroll are not affected by the program. Keeping up with your monthly deposits is the biggest factor in finishing on schedule.
What types of debt can be enrolled in the program?
Settlement programs can enroll most credit cards, store cards, medical bills, personal loans, and other unsecured debts. They do not cover secured debts such as mortgages and auto loans, federal student loans, or debt held at federal credit unions.
Do you make monthly payments to my creditors?
No. A settlement program does not make your monthly payments to creditors. You deposit into your dedicated account instead, and the program’s negotiators work to reduce what you owe. Each settlement is paid from that account once you approve it.
Do I have to keep paying my creditors?
Settlement programs are built for people who cannot keep up with their payments because of financial hardship. If you can pay your creditors every month, that is the better path, and a settlement program is probably not the right fit. Your specialist will tell you so during the consultation.
Can you stop my creditors from calling me?
No one can stop creditor calls completely. Calls are normal when payments are behind, whether or not you are in a program, and a creditor has the right to call to collect. Enrolled clients receive a welcome package with guidance on handling collector calls.
Are there rules regarding creditor contact?
Yes. Third-party debt collectors must follow the Fair Debt Collection Practices Act (FDCPA), which bans harassment, threats, and misleading statements. If you think a collector has crossed the line, tell your program’s account management team. When a collector appears to be breaking collection law, a debtor’s rights attorney in the network can review the case.
What do I say if a creditor or collector calls?
You can ask the caller to send all communication to you in writing. Under the FDCPA, you can also tell a third-party debt collector in writing to stop contacting you. You are not required to discuss the debt over the phone.
If a collector keeps calling, contact your program’s client support team for help handling it.
What should I do with letters I get from my creditors?
Forward any letters from creditors or collectors to your program’s client support team. Email or fax is fastest.
When do you start negotiating?
Timing depends on your situation: the amount of debt, how far behind each account is, the type of creditor, and how quickly your account builds funds. Some accounts are negotiated soon after enrollment, and others months later.
The negotiators choose the timing deliberately. Contacting a creditor too early can trigger more aggressive collection activity.
Will all my debts be settled at the same rate?
Results vary by account. Your monthly deposit is based on an estimated average settlement. If your settlements come in lower than the estimate, you will finish sooner or have money left in your account.
If they come in higher, the program may take longer, or you may be asked to add funds.
Is my trust account the same as a regular bank account?
Your deposits are held in a dedicated account at an FDIC-insured bank and managed by an independent account administrator. You own the funds and receive regular statements. You can leave the program at any time and get back the money in the account, minus any fees already earned on settled debts.
How are settlements authorized?
When the negotiators reach an acceptable offer with a creditor, the offer is sent to you by mail, email, or fax for approval. No settlement is paid without your sign-off.
Do I have online access to my account?
Yes. Your welcome package includes the username and password for your online account.
Can I be sued by my creditors?
Yes. A creditor can file a lawsuit while you are in a settlement program, and no one can prevent that. If you receive a summons or any other legal document, send it to your program’s client support team right away so the account can be prioritized for settlement.
What happens if I get sued by my creditors?
Send the summons or court papers to your program’s client support team immediately. Program services are performed by stringently vetted in-network law firms, and an attorney can respond to the case and work toward an expedited settlement.
How often do your clients get sued?
Lawsuit risk cannot be predicted precisely, because every situation is different. It depends on the creditor, the size of the balance, how long the account has gone unpaid, and your income and employment. If a lawsuit is filed, follow the steps above.
How may a debt collector contact me?
A debt collector may contact you in person, by mail, by phone, by fax, or by email or text message. The FDCPA and the CFPB’s Regulation F limit when, where, and how often a collector can do so.
What are my options if my creditors violate collections laws?
You may have the right to sue a debt collector that violates the FDCPA. If a call or letter looks like a violation, share it with your program’s account management team. A debtor’s rights attorney in the network can review it and, if the law was broken, file an action on your behalf.
What must the debt collector tell you about the debt?
Within five days of first contacting you, a debt collector must send you a written validation notice. It must state the amount of the debt, the name of the creditor, and your right to dispute the debt within 30 days.
May a debt collector contact anyone else about my debt?
With limited exceptions, such as your spouse or your attorney, a collector may contact other people only to find out how to reach you. It may not tell them that you owe a debt.
Does debt settlement have a negative impact on my credit?
Yes. Debt settlement has a negative impact on your credit. Missed payments are reported while you are in the program, and settled accounts are reported as settled for less than the full balance. Resolving the debt is the foundation for rebuilding your credit afterward.
Do you offer credit repair services?
United Debt Relief offers credit repair. Credit Repair & Builder is one of its five programs, alongside debt settlement, debt validation, debt consolidation loans, and tax resolution. Under the Fair Credit Reporting Act, only inaccurate, incomplete, or unverifiable items on a credit report can be disputed and corrected. Accurate, verifiable negative information cannot be removed from a report by any company.
Because accounts enrolled in a settlement program keep reporting until they are resolved, credit repair work is generally taken up after those accounts are settled rather than during an active program. United Debt Relief specialists consult with each client, determine which program fits, and handle enrollment, and program services are performed by stringently vetted in-network providers and law firms. Results vary.
Are there any tax consequences?
Possibly. When $600 or more of a debt is forgiven, the creditor generally must file Form 1099-C, and the forgiven amount may count as taxable income. Exclusions, such as insolvency, can reduce or eliminate the tax. See our guide to Form 1099-C and canceled debt, and talk with a tax preparer about your situation.
For the latest numbers on what Americans owe, credit card balances, average APRs, and delinquency trends, see our regularly updated Debt Data page. Further reading from official sources: the CFPB’s consumer tools and the Federal Reserve’s G.19 consumer credit report.