A key part of the debt settlement process is debt negotiation. That’s when a creditor agrees to reduce the amount you owe and “settle” the debt for less. Believe it or not, this is a very standard process for creditors and other companies that manage debt. Many creditors routinely settle accounts for less than the amount owed. Your creditors may be among them.

You could try to negotiate and resolve your debts on your own if you have the time and negotiation skills required. If you want to try this tactic, you just need to contact your creditors directly, negotiate with them to reduce what you owe, and get a written agreement that outlines the terms of your negotiation.

Usually, only unsecured debts are eligible for debt settlement. “Unsecured” means the debt isn’t tied to an asset, such as a car or house. Examples include:

1. Credit card debt

2. Department store charge card debt

3. Personal loan debt

4. Medical debt

5. Some private student loan debt

Debt settlement will not work with some kinds of debt, such as secured debt, which is a loan secured by a tangible asset. Examples of debts that can’t usually be negotiated include debt from:

1. Vehicle loans

2. Mortgages or home loans

3. Federal student loans

4. Other government loans

5. Utility bills

6. IRS (overdue taxes)

7. Lawsuits

1. Resolves all debt enrolled in the debt settlement program: Debt settlement doesn’t just move higher interest-rate debt to lower-interest-rate debt. Debt settlement works to lower the principal balances you owe so you can put it behind you faster than you could with a loan.

2. Streamlines debts into one monthly payment: You make a monthly deposit into a debt settlement special purpose account in an amount that fits your budget. This deposit could be less than the minimum payments on your credit cards or monthly payments on a debt consolidation loan. It is also usually much less than the monthly payment in a debt management plan offered by credit counseling agencies.

3. Costs less than alternatives: Debt settlement typically costs less than a loan, since a loan charges interest on top of what you owe. In addition, settling debt generally costs less than what you will pay by making minimum credit card payments.

4. Has better repayment terms than bankruptcy: Debt settlement programs usually provide better repayment terms than do Chapter 13 bankruptcy filings. Plus, debt settlement helps people get out of debt without leaving a permanent bankruptcy judgment on their record.

5. No conflict of interest with creditors: Unlike credit counseling agencies that often accept “good faith” payments from credit card lenders, debt settlement companies work only on the consumer’s behalf.

6. Encourages better money habits: The best debt settlement companies help clients learn to create and use a budget, and incorporate simple personal finance best practices into their lives. Many people also benefit from the discipline required in making regular deposits into their special-purpose account that funds their own debt settlements.

   horizontal accordion and verticle accordion on your website. 

1. Impacts credit reports and scores: The debt settlement process requires you to go past due on accounts so that creditors will be willing to negotiate. That requirement can be uncomfortable, and it can result in a negative impact on your credit reports and credit scores.

2. Creditor or collection agency calls: Because you are falling past due, creditors may continue to contact you. Freedom Debt Relief offers options and information to its clients on how to handle these phone calls.

3. Potential legal action: Some creditors may threaten legal action or actually take legal action for repayment. A good debt settlement company will support its clients through this process. At Freedom Debt Relief, we offer an optional service with an outside law firm to represent clients should legal issues arise.