How It Works

Essentially, the debt settlement company negotiates on the borrowers’ behalf with creditors to reduce the overall debts in exchange for an agreement upon regular payments to be made. Only unsecured debts, such as medical bills and credit card debts can be handled, not student loans, auto financing or mortgages. For the debtor, this makes obvious sense – they avoid the stigma and intrusive court-mandated controls of bankruptcy while still lowering, sometimes by more than 50%, their debt balances. Whereas, for the creditor, they regain trust that the borrower intends to pay back what he can of the loans and not file bankruptcy (in which case, the creditor risks losing all monies owed).

There are obvious drawbacks – credit reports will show evidence of debt settlements and the associated FICO scores will be lowered as a result. However, if a “paid in full” letter is obtained from the creditor, the debtor’s credit report should show no sign of a debt settlement. There’s always the possibility of lawsuit whenever debts lay unpaid. Though few creditors wish to push borrowers toward bankruptcy – and the potential of governmental protection against all debts. In addition, the specific debts of the borrowers themselves affect the success of negotiations. Tax liens and domestic judgments, for reasons that should be clear, remain unaffected by attempts at settlement. Student loans, even those not federally subsidized, have been granted special powers by recent legislation to attach bank accounts without possibility of Chapter 7 bankruptcy protection. Also, some individual creditors, including Discover Card, for example, tend to have an aggressive resistance against negotiations.

Debt Settlement: The 5 Steps to Zero Debt

Step 1: Contact us for a FREE no-obligation consultation. We’ll take a look at your total financial picture and help you determine which debt relief options are right for you.

Step 2: Set up a single monthly payment. Once we’ve determined that debt settlement is right for you, we’ll work with you to establish a single, affordable monthly payment. You’ll make this monthly payment into an FDIC-insured Debt Reduction Account that you control.

Step 3: We negotiate with each of your creditors individually. After your Debt Reduction Account has grown to the point where we can make settlement offers to your creditors, we’ll begin individual negotiations with them. By dealing with your creditors individually, we’ll have the best chance of getting the best offer possible from each one. Our goal is to work out a settlement agreement for as much as 50 percent less than what you current owe.^* We’ll give you regular progress reports so you’re always well-informed and up-to-date on how your account settlements are going.

Step 4: Your accounts are paid off and closed. When we reach a settlement agreement with one of your creditors, we’ll contact you to get your permission to pay off the new, lower amount. Payments to your creditors will be made out of your Debt Reduction Account, but we will never make a payment out of your account without your prior express authorization. As each one of your accounts is settled and closed, we’ll send you a notification letting you know your balance on that account is officially zero.

Step 5: Your credit report gets updated to show your debts as paid. Once an account is settled and closed, we’ll ask your creditor to report your new zero balance to the credit rating bureaus. Your account will be officially identified as “settled,” “settled in full,” or “settled for less than the full amount,” and you’ll have successfully ended your relationship with that creditor