Debt Settlement

Discover does not work with debt settlement companies so it is in your best interest that you negotiate with them directly if you are considering a debt settlement program.

Companies that do not work with debt settlement companies may seek legal action once they know you have entered a debt settlement program.

What is debt settlement?

It is a process of negotiation with creditors, where balances are settled at a reduced rate.  Settlements can be paid off in a lump sum or in monthly payments.  This can be a good choice if you cannot pay off your debts in less than 3-4 years or if you have financial hardship and are falling behind on your monthly minimum payments.  Debt settlement is sometimes referred to as debt negotiation or debt arbitration, but is not to be confused with debt consolidation.

Will all my creditors settle and work with debt settlement companies?

Most creditors will work with debt settlement companies because they rather retrieve some of the balance rather than nothing.  There are a few creditors that may refuse to work with a settlement company, but most of the major creditors do.

Can I settle my debts myself?

Absolutely.  If you only have a couple of accounts with a total debt under $10,000, you can negotiate with your creditors, but a disadvantage is most people will not know what a fair or good settlement offer is.  Also, you will have to deal with your creditors and collectors directly.  If you have more than $10,000 in debt or numerous accounts, it may be beneficial to get professional help.

What type of debt is acceptable in a debt settlement program?

Credit cards, unsecured personal loans (no collateral), medical bills, collection accounts, and repossessed car loans are usually accepted.

Payday loans, student loans, mortgage loans, auto loans, and loans with collateral are usually not accepted.

How long does a debt settlement program last and how much will it cost?

Typically 12-48 months.  There are a lot of variables on the time frame such as financial hardship, the amount of debt, how much you can save on a monthly basis, and the age of the debt.  The more a person can save, the faster they can finish the program.

Debt settlement companies usually charge anywhere from 15% to 20% of the total debt enrolled.  Some charge additional fees upfront.

Will the collection calls stop?

No, all calls cannot be completely stopped.  If you are enrolled in a debt relief program, the calls may be lessened.  However, collection agencies will still have the right to call you.  You can send a cease and desist letter to the creditor which will prohibit them from calling.  Know your rights against collectors.

Can I get sued while enrolled in a debt settlement program?

Yes, there is a possibility of getting summoned.  No companies should put you on a program longer than 48 months because the possibility of getting sued is enhanced.  Good debt settlement companies will try to get a resolution after being summoned.