How Does Debt Settlement Work?
If you’re in debt, it might seem obvious that the only way to satisfy your creditors is to pay back what you owe in full. But there’s another option: pay back just a portion of what you owe through debt settlement.
Settling your debts is similar to paying them off, but it involves a few extra steps. And it can work much faster than paying back your debts in full through minimum payments. If you’ve experienced some sort of financial distress that’s made it difficult for you to pay back your creditors, then a hardship-based program like debt settlement could help.
So how exactly does debt settlement work? In a nutshell, debt settlement is the process of negotiating with creditors to reduce the amount owed on a debt. Creditors agree to accept a reduced amount to consider the debt paid, and the person who owed the debt is able to pay off the debt for less and faster than making monthly minimum payments.
In the Freedom Debt Relief program, debt settlement is a 4-step process, but keep in mind that other debt settlement companies may work differently.
The 4-step Freedom Debt Relief settlement process
1. Build funds for settlements
Once you enroll in the Freedom Debt Relief program, the first step is for you to build up funds that will be used to pay creditors for settlements we negotiate on your debts. Instead of making minimum payments on your debts to your creditors, you will make a monthly deposit into an FDIC-insured account, which you control.
The amount of money you need to deposit into this account each month is customized to fit your budget, and is often much lower than your minimum payments to creditors. That means that as soon as you enroll, you could see an immediate increase in your available cash each month.
2. Negotiate with creditors
Once the funds in the account have grown large enough, our negotiation experts begin reaching out to your creditors to see if they are willing to settle for less than the full amount owed to consider your debt paid. One of the reasons why creditors are willing to accept a reduced amount is because individuals in our program have experienced a financial hardship.
Freedom Debt Relief has been negotiating with creditors since 2002, and we use this experience to create a custom strategy and negotiation timeline for each of our clients. Our goal is to settle all of your enrolled debt within 24-48 months, and over half of our clients get their first debt settled within 90 days of making their first deposit.
3. Authorize settlements
As soon as your creditor agrees to a settlement, we email and text you to share the details. Once you authorize a settlement, payment is processed from your FDIC-insured account to the creditor. The settlement payment may be one lump-sum amount, or it may be structured into multiple payments over time.
Negotiation fees are processed from the same account to Freedom Debt Relief for that specific debt. The fee is based on the amount of debt enrolled into the program and is calculated into your monthly deposit. These fees are set and will never increase.
4. Celebrate financial freedom
When the settlement has been paid in full, the creditor considers your debt fully resolved, and you can officially put it in your past!
This process repeats for all the debts enrolled in the program until each one of them has been resolved. At this point, you graduate from the program free of the debts you enrolled and in a much stronger place financially.
Have questions? We are here with answers!
To learn more about debt settlement and see if it’s the right solution for you, give one of our Certified Debt Consultants a call at 800-910-0065. We can assess your situation to see how soon Freedom Debt Relief could help you put your debts behind you.