How Does a Debt Relief Program Work?

In a debt relief program, the consumer pays back a debt in multiple payments that is significantly less than the owed amount. This is also known as debt settlement, debt negotiation, or debt resolution.

Usually, the consumer stops paying their creditors and saves money until they have a certain amount. Then, they contact their creditors to negotiate paying back their debts in a couple payments that are lower than the total amount they owe.

Minimum debt amount$7,500 minimum
Types of debt that qualifyUnsecured debt, including credit card debt, personal loans, and medical bills
Types of debt we cannot help withMortgages, auto loans, federal student loans
Time it takes24 – 48 Months*
Fees15 – 25% with an average fee of 21.5%

Generally, there is a minimum amount of debt required for debt relief. Debt relief programs are meant for larger amounts of debt because creditors are unlikely to settle on debts that are smaller and easily paid off in a short amount of time.

Debt relief programs usually only deal with unsecured loans, which are loans that do not involve collateral. Loans like car loans and mortgages do not qualify, and federal student loans are not applicable. Medical debt, credit card debt, and personal loans are all accepted, and private student loans may be accepted on a case by case basis.

Why choose a debt relief program rather than doing it yourself?

  1. Many people find it hard to negotiate with their creditors. A debt relief program has expert, experienced negotiators that know how to deal with creditors. They take the hassle and heartache out of a fraught situation. Additionally, because debt relief companies deal with a lot of debt in different accounts, they have more leverage and can bulk their deals to get better settlements.
  2. Following a debt relief plan requires discipline and strategy. This can be hard for someone already struggling with debt. It can be hard to figure out a plan and payment strategy on your own to begin with. On top of that, having to stick to a strict savings schedule and decide which debts to settle first and for what amount can be tougher.
  3. When you stop paying your creditors, they often will start harassing you. A debt relief agency can work with you on ways to deal with collectors. There are laws surrounding how collection agencies and creditors can and cannot contact you. The goal of the Freedom Debt Relief program is to have them contact us for payments and negotiations rather than contacting you.

A debt relief program has expert, experienced negotiators who know how to deal with creditors.

A debt relief program has expert negotiators that know how to deal with creditors. At Freedom Debt Relief, we have been doing this since 2002 and have settled over $10 billion in debt. We use our size and experience to our consumers’ advantage by allowing us to bulk deals together to secure the best settlement percentages possible. This makes it more efficient for creditors, which saves both sides money and time. Our goal is to negotiate for you lower total balance, lower interest rates, and waive creditor’s fees.

How does a Debt Relief Program work?

Our process starts with a phone call to one of our Certified Debt Consultants. We review your financial situation and help you find out if Freedom Debt Relief is the right option for you.

If you choose to enroll in our program, we work with you to create a customized and affordable payment schedule for you. Payments are made into a Dedicated Account that you control.

Once there is a sufficient amount of money in the account, we begin to negotiate with your lenders. We offer to settle the debt for a payment that is lower than the debt amount. When a settlement has been reached, you are asked to approve the settlement and then the funds you have been depositing into your Dedicated Account will be processed to your creditors as payment. This process repeats until all of your debts are settled.

If you don’t know whether your debts qualify, reach out to us at 800-230-1553 or request a free debt evaluation.

Drawbacks of a Debt Relief program

As with any debt management strategy, there are benefits and drawbacks to a debt relief program.

  1. Creditors will continue to add interest and late fees onto your balances if your accounts are delinquent. While your balance usually increases until a settlement is reached, bear in mind that interest accrues whether you make minimum payments or not. Our goal is to negotiate substantial reductions to the balances on your accounts, even after the interest and late fees have accrued.
  2. Forgiven debt may be considered taxable income by the IRS unless you are insolvent, which is when your debt totals more than the total value of your assets. Insolvency can be hard to determine, so contact a tax professional to find out more about whether you qualify. Even if you do need to pay taxes on forgiven debt, however, paying taxes on $25,000 of forgiven debt is better than paying the entire $25,000 amount.

If you are figuring out whether debt relief is the correct program for you, find out more about other debt strategies and see how they compare to debt settlement.

Learn about 6 common debt solutions

Compare them all to find out the right one for you

Are Debt Relief Programs Scams?

There are many programs promising debt relief out there, and many of them are scams. Be careful with any company that promises easy, pain-free solutions – crushing debt is hard and takes commitment.

Be careful with any company that promises easy, pain-free solutions – crushing debt is hard and takes commitment.

When you are researching, be wary of any companies that will not give you free, thorough information about their program before you enroll. They should also provide a free consultation to walk you through the program and ensure that their program is right for your financial situation.

Before you enroll, make sure you are informed about:

  • What services are provided: Make sure you are clear about what services they provide, what services they do not offer, and what actions it would take on your part to successfully complete their program with the desired results.
  • Price: Know what fees they charge, when they expect payments, and any other conditions. Companies should not be charging fees before they settle your debt.
  • Timing: You should know about the time the entire program will take, and how long it will take before an offer will be made to a creditor.
  • Settlements: You should know how much you much save, either money or percentage amount, before the company will make an offer on each debt.
  • Negative consequences: Beware of any company that promises no downsides or will make your debt “go away.” There is no way to make debts disappear without any effort or negative impact – all legitimate debt relief programs and strategies have different benefits and drawbacks.


What to look for in a debt relief programFreedom Debt Relief
A long track record of negotiating settlementsThis means they have experience on their side. Being around for a long time means that they have successfully helped out many clients over the years.Freedom Debt Relief was founded in 2002, and we have enrolled over 600,000 clients and resolved over $10 billion in debt. We’re proud of our experience and long track record as an industry leader.
Free consultations before you enroll in the programYou should be able to talk about your situation with the company before you enroll, and find more the specifics of their debt relief program.Our debt consultants discuss your financial situation with you, tell you about all of your debt management options (not just our program), and go through the specifics of our program to help you figure out if Freedom Debt Relief is right for you.
Professional, educated staffThey should have experienced, trained staff members that are qualified to answer any questions you have about their program.All Freedom Debt Relief debt consultants are certified by the International Association of Professional Debt Arbitrators (IADPA).
Customized programsThey should be willing to walk through your situation with you, and figure out whether their program is right for you. Beware of companies that promise a one-size-fits-all solution: everyone’s financial situation is different, and each solution needs to be customized to fit.Our debt consultants walk you through the program and come up with a customized solution for your debt. We’ll talk to you about your debt options, even if you decide that Freedom Debt Relief isn’t right for you.
Reviews and testimonialsCompanies with proven track records will have customers that are happy to talk about their successful experiences. Look for verified reviews from present or former customers on sites like the Better Business Bureau or TrustPilot.Read Freedom Debt Relief testimonials and reviews.

Take the time to research all your options before you make a decision. Crushing debt and achieving financial freedom can be hard. It’s important to pick the right solution for your situation and getting all the information you can before you enroll.

Is Freedom Debt Relief the right program for me?

Debt relief a trusted, reliable, and time-tested solution for people with large amounts of unsecured debt that are struggling to keep up. A debt relief program can keep you on track, give you strategy and guidance, and provide the structured plan you need to resolve your debt for a lower settlement.

We’ll work with you to figure out what is the right debt strategy for you to pay off your debts as quickly as possible, for the lowest amount. Freedom Debt Relief has enrolled over 600,000 clients over 15 years, and we have negotiated significant savings for them. Request a free debt evaluation today or call us at 800-910-0065 to find out if our program could help you, too.

How to find a good debt relief company

Learn 7 red flags to watch for