Debt settlement: how it works and what to consider

What an agreement actually changes

Settlement is a negotiated agreement about a particular debt. It does not automatically change every account you owe, and a provider cannot promise that every creditor will participate. Get the specific terms in writing before relying on an offer.

A settlement program is different from a consolidation loan. A loan creates a new borrowing obligation. A settlement provider seeks agreements with creditors. Done With Debt does not issue loans or negotiate settlements itself.

Sources: FTC: How to get out of debt · CFPB: Comparing debt relief approaches

Understand the process before committing

A provider reviews your debts, circumstances and state of residence. If it offers a program, its written agreement should explain the services, fees, funding arrangements and cancellation terms. Ask who holds any money you set aside and how you can access it.

Some programs involve stopping creditor payments while money accumulates for possible offers. Missed payments can damage credit, add interest or fees, and lead to collections or lawsuits. A consultation is not a reason to stop paying your creditors.

Sources: FTC: How to get out of debt

Consider affordability as well as the balance

A large balance alone does not tell you which approach is appropriate. Compare what you can afford after housing, food, utilities and other essentials with the costs and risks of each option.

If you cannot reliably fund a proposed plan, ask what happens when a payment is missed or the program ends early. Also consider direct creditor hardship arrangements, nonprofit credit counseling and advice from a qualified bankruptcy attorney.

Sources: FTC: How to get out of debt · CFPB: Comparing debt relief approaches

Questions to take to a provider

Keep a written record of the answers so you can compare offers on the same basis.

• Which of my specific debts would you accept, and which would stay outside the program?
• How is every fee calculated, when is it charged, and what happens if no settlement is reached?
• What assumptions support the proposed monthly funding and completion estimate?
• Who handles creditor communication, and what happens if I receive court papers?
• What money or fees could I lose if I leave before completion?

Sources: FTC: How to get out of debt

Where Done With Debt fits

We conduct an initial qualification review and, when appropriate, connect you with an independent provider. That provider determines final eligibility, fees and program terms, and handles negotiations and settlements. Our initial consultation is free and does not enroll you in a program.

Services are unavailable through Done With Debt to residents of Arkansas, California, Hawaii, Louisiana, New Jersey, North Carolina, Oregon or Wyoming. Other state restrictions and provider criteria may apply, and a referral requires at least $15,000 in total unsecured debt. We cannot guarantee a settlement amount, savings or completion date.

Sources: Done With Debt: Our role and contact details