Frequently Asked Questions

If you don’t see the answer you’re looking for, please call us at 800-910-0065

Is Freedom Debt Relief a scam?

No. Freedom Debt Relief is a legitimate company that has helped tens of thousands of clients since we started in 2002. We are a founding member of the American Fair Credit Council (AFCC) and a platinum member of the International Association of Professional Debt Arbitrators. Every day, our dedicated employees carry out our mission to help people solve their debt problems — even if the solution they choose isn’t Freedom Debt Relief. Learn more about our commitment to integrity and our accreditations.

When are debt consolidation loans a good idea?

A debt consolidation loan could be a good idea if combining your debts would allow you to reduce your monthly payments, save on interest or pay your debts off faster. If you have good to excellent credit, you may be able to get approved for a larger loan amount at a lower interest rate. Estimating your loan costs using a debt consolidation loan calculator can help you decide if it's worth it. 

How long does it take to garnish a bank account?

The language in bank and credit union deposit agreements varies. Still, most institutions state that they can exercise the right of offset once a loan becomes “past due” or that they will exercise their right under applicable state law. So an offset could happen as soon as you miss a payment, and you will probably not get a warning. 

For garnishments involving a court order, the judgment creditor must file the request for garnishment, and the courts typically issue the order within a few days. At that point, the creditor can present it to your bank and freeze your account. This usually is one to two weeks from when the creditor requests the order. Neither the creditor nor the bank has to give you any notice that a garnishment is in process. 

What is bankruptcy credit counseling?

You can’t file a bankruptcy petition without first completing credit counseling with an approved provider. When you finish the required session, you’ll get an authenticated certificate to file with the bankruptcy court.

Pre-bankruptcy credit counseling covers these topics: You’ll review these topics with your credit counselor:

  • Your personal finances

  • Bankruptcy alternatives

  • Personal budget 

You can receive your counseling in person, by phone, or online. Sessions normally take an hour. Counseling costs about $50, but you can request a fee waiver if you can’t afford the service. 

Is severance pay taxable if I’m laid off due to COVID?

Severance pay is taxable regardless of the reason for your termination. The federal government adjusted unemployment benefits during the worst of the pandemic when jobs were not widely available. Those programs have lapsed as of this writing.

Is severance pay taxable if I’m laid off due to COVID?

Severance pay is taxable regardless of the reason for your termination. The federal government adjusted unemployment benefits during the worst of the pandemic when jobs were not widely available. Those programs have lapsed as of this writing. 

How much taxes would I owe for forgiven debt?

For many consumers, debt forgiven in a debt relief program is considered income. If your debt relief is taxable, your taxes will depend on the tax bracket that your income places you in. Here are tax brackets for the 2021 tax year if you’re married and filing jointly:

If you’re a married couple and your creditors forgive $10,000 of debt, your tax would range from $1,000 to $3,700. 

What are the best debt consolidation loans?

The right debt consolidation loan for you depends on the amount of debt you have, your income, credit, and homeownership. 

Home equity loans for debt consolidation have the lowest rates. However, not everyone has enough home equity to borrow against or wants to put their home at risk if they can’t make the home equity loan payments. And closing costs can be high. But home equity loans are good options if you owe a lot of debt and can qualify for financing. If you need to lower your debt payments, consolidating them with a home equity loan gives you more time to pay and almost always lowers your payment considerably. 

However, if you have less debt and excellent credit, a balance transfer credit card can get you to two years to clear your balance, interest-free. If your balances are too high to clear with a balance transfer card, but low enough to pay off in a few years, a personal loan might be the answer. 

What is the difference between a credit report and a credit score?

A credit report contains your credit information. That includes your credit limits, account balances, payment amounts, and payment history. It also shows inquiries (when you apply for credit and a lender pulls your credit report), public records like lawsuits or bankruptcies, and collection accounts. Your credit report also contains personal information like your date of birth, social security number, address, and employment information. This personal information is not a factor in credit scoring.

A credit score is a number calculated from the information contained in your credit report. The score makes it easier for lenders to make decisions. Instead of looking through your entire credit report, lenders can set minimum credit scores for eligible applicants. 

What if I can’t get a big enough loan to consolidate all of my debts?

Fortunately, you can still improve your financial position with a debt consolidation loan. First, list your debts – the interest rate, balance, and monthly payment. If reducing your interest rate is your primary goal, rank the accounts by interest rate, Consolidate the balance with the highest rate, then the next highest, and so on. 

If you need to reduce your total monthly expense, add another column to your list. For each account, divide the monthly payment by your current balance to get your payment percentage. You'll achieve the greatest payment reduction by consolidating the accounts with the highest payment percentage.

How to get debt collectors to stop calling my family?

You might be shocked if a debt collector contacts your loved ones. They might track down your relatives or friends on social media or via sites that publish addresses and phone numbers. But is it legal for debt collectors to call your family? 

The Fair Debt Collection Practices Act allows debt collectors to contact people you know for a single purpose – to find your address, phone number, or workplace. Unless they are contacting your spouse, your executor/guardian/administrator/attorney, or your parents (and you’re a minor), debt collectors cannot disclose that they are calling about a debt. Debt collectors cannot disclose that they are working for a collection agency unless your relative or friend asks them who they work for.

Debt collectors cannot ask your loved ones to pay your debt. They cannot threaten to tell your family about the debt to shame you into paying it. And they cannot continue to call your family once they have made contact. All of those tactics are illegal, and you can sue if a debt collector breaks the law.

What happens if you can't pay unsecured debt?

Unsecured debts must still be paid. Just because the lender can't take property from you for non-payment doesn't mean you just walk away. Lenders can sue you for payment and possibly garnish your paycheck or attach your bank account. They can send your account to a collections agency. They may be able to contact you often and harass you about your debt. And they can report your default and harm your credit score.

What’s the fastest way to pay off debt?

If you want to know how to pay off debt fast, you might ask a debt consolidation lender, a credit counselor, a debt consultant, or a bankruptcy attorney. Here are the timeframes for each option:

  • Debt consolidation does not pay off your debt. But by replacing high-interest debt with low-interest debt, you may clear your balances faster. Pick the debt consolidation loan with the lowest interest rate, then choose the shortest term you can afford. 

  • Debt management from a credit counseling company typically takes four years. Note that debt management plans do not reduce what you owe. Debt management can fail when participants can’t afford the monthly payment over several years.

  • Debt settlement: According to the American Fair Credit Council, “Clients generally see initial account settlements within 4-6 months.” It typically takes two to four years to graduate from a debt settlement program. 

  • Chapter 13 bankruptcies take three to five years to complete, but most filers have to make payments for five years. 

  • You may be able to get debt-free with a Chapter 7 bankruptcy in four-to-six months after filing.

Is debt consolidation a good idea for student loan debt?

Government-backed student loans are not particularly good candidates for debt consolidation. Most already have low interest rates. And. government-sponsored student loans offer borrowers special rights and advantages like forgiveness in some cases and income-based repayment programs. You’d lose those special features if you replaced this kind of loan with another form of debt. Private student loans may be better candidates.

Is debt settlement worth it?

The answer to that depends on several factors. Here are a few:

  • How much debt do you have, and how serious is your problem?

  • Do you have access to money you could offer your creditors?

  • What is your income tax bracket?

  • Are you willing to file bankruptcy?

  • Can you handle the stress of collection calls?

  • Is your credit score high, or has it already been damaged?

The reason to consider these factors is that consumers who are not in deep financial trouble usually have less drastic options available – like debt consolidation. And consumers who are entirely insolvent or are facing lawsuits may find bankruptcy the best choice. High earners in the top tax bracket pay more tax on forgiven debt than those in lower brackets. 

If you’re on the fence, you can contact a debt consultant at a debt settlement company who is trained to answer your questions and help you calculate the cost of debt settlement. Only if you know the cost can you decide if debt settlement is “worth it.”

What is the difference between credit counseling, debt settlement and bankruptcy?
  • Credit counseling can help you learn to budget and stop overspending. Counselors can enroll you in a debt management plan where they typically lower your interest rates and set up a payment schedule to simplify debt repayment and make it more affordable.

  • Debt settlement means convincing your creditors to accept less than you owe as payment in full. They may be willing to do so if you cannot afford to repay the full amount. 

  • Bankruptcy is a court-ordered plan in which you either surrender assets or pay into a plan to discharge some or all of your debts. 

  • Learn much more from this article about the differences between credit counseling, debt settlement, and bankruptcy

What is personal net worth?

The short answer is net worth is what you own minus what you owe. Simply add the fair market value of all your assets -- personal possessions, vehicles, real estate, investments and savings -- and subtract your debt balances -- credit cards, auto loans, mortgages, student loans, etc. The difference is your net worth.

I just got a raise. Will that help my credit score?

No. This may help you get credit, but your credit score is based strictly on how you’ve used credit, not on your overall financial means.

How does debt relief affect my credit?

Our goal is to help you get out of debt as fast as possible by negotiating with your creditors to get them to accept significantly less than face value on your unsecured debts. Depending on the condition of your credit report at the time of enrollment, any debt settlement or debt negotiation program, including ours, could negatively affect your credit. Negative information could remain on your credit report for up to seven years. By engaging in good credit behavior, anyone’s credit score could recover over time. Results vary depending on your payment history, credit utilization, length of credit history, and debt-to-income ratio.

If getting out of debt is more important to you than the likelihood that your score will be negatively impacted, our program could help you resolve your debt faster and for less—without declaring bankruptcy.

How many credit cards should I have?

If you pay your balances in full each month and can get cards without annual fees, feel free to have as many cards as you want. The more available credit you have, the better your credit utilization ratio. And credit utilization comprises 30% of your credit score. If you can control your spending, five credit cards is a good number, according to credit bureaus.

Can credit repair services remove bad payment history from my credit report?

Only if you can document an error and clear it up with the credit reporting bureaus. (You can do this yourself for free.) Be very skeptical of any credit repair service claiming it can magically make negative credit history disappear.

Where is the best place to get a debt consolidation loan with bad credit?

The answer depends on your credit score and your financial position. Providers like LendingPoint make personal loans with bad credit. However, the interest rate can be as high as 35.99%. Consolidating only makes sense if you can get better terms with a new loan than you currently have. BestEgg and Upgrade offer unsecured and secured personal loans with bad credit. You might qualify for a better interest rate if you can secure the loan with collateral like a vehicle or other valuables. 

Of course, home equity loans offer the lowest rates at any credit level. If you have enough home equity and can qualify for financing, a home equity loan or HELOC offers a lower interest rate.

Is a debt consolidation loan a good idea?

Debt consolidation loans are a good idea when you can get better terms on a new loan than you have on the loans it replaces. 

  • You can replace high-interest debt with lower-interest debt.

  • You can lower your payments (note that this will likely increase your interest expense, and you should try to pay off debt consolidation loans as fast as possible). 

  • You can simplify debt management by replacing several payments with one.

Are debt consolidation loans a good idea for problem spenders? Absolutely not. Debt consolidation failure usually happens when consumers transfer their balances to a new loan (debt consolidation does NOT “wipe out” debt!) and then run up their credit cards again. Then, they have the new loan plus maxed-out credit cards. 

What should I look for in a debt consolidation loan?

What should I look for in a debt consolidation loan?

A monthly payment that you’re confident you can afford is a must. Ideally, the loan should also have a lower interest rate than the existing debt you want to consolidate.

Should I close my credit card accounts after I pay off their balances? 

Don’t be too quick to close accounts. Doing so could raise your credit utilization ratio, which is a negative factor in credit scores. Better to keep the accounts open, but with little or no balances.

Can your savings account be garnished completely?

Can creditors totally clean you out? That depends. Most states have some protections. For instance, banks and creditors may not be able to garnish social security payments, retirement accounts, or take all the funds in a savings or checking account. And a few states disallow bank account garnishment altogether.

How to negotiate debt settlement myself?

DIY debt settlement is possible. First, decide how much you want to offer your unsecured creditors to settle your debt, and then make a plan to come up with the money. You’ll have to withdraw, borrow or save this amount before contacting your creditors. 

If you have immediate access to a sum you can offer, debt settlement goes faster. In most cases, you’ll need to stop making payments for a few months to convince your creditors that you can no longer afford the debt. 

When you’re ready to settle, contact your creditors and make them an offer in writing to settle your account for less than the balance owed. There are sample letters online that you can copy and use. Do not send any money until you have a written agreement signed by all parties. 

Why are minimum credit cards payments so low?

Credit cards companies do not provide credit cards, especially those with cashback and other rewards, out of the goodness of their hearts. They do it to earn money. And they set minimum payments so that you have to pay something each month, and so that you'll eventually pay off your balances. But the minimum payment can result in high interest cost and keep you in debt for decades. If you start out making a minimum payment, continue to make at least that payment. Your statement will show a lower minimum payment when your balance drops. But if you keep making the higher payment, you'll pay less interest and zero your balance sooner.

What are the pros and cons of credit counseling, debt settlement and bankruptcy?

The pros and cons of credit counseling, debt settlement, and bankruptcy are as follows:

Credit counseling and DMP (debt management plan)

Pros: Low cost, minimal harm to credit scores

Cons: Low success rate, unaffordable for many, does not reduce balances

Debt settlement

Pros: Balances are reduced, privacy is assured, consumer keeps control, higher success rate than DMP or Chapter 13

Cons: Possible tax consequences, fees, creditors are not required to participate


Pros: Creditors cannot opt out, unsecured debts may be completely discharged, forgiven amounts are nontaxable, Chapter 7 takes only a few weeks

Cons: Attorney costs, filing is public, consumer has no control and must accept judge’s plan, Chapter 13 takes years and has a low success rate.

Why is severance pay taxed at a higher rate than regular earnings?

For tax purposes, severance pay is considered supplemental income. The IRS requires employers to withhold 22% of severance pay for taxes. If you chose a lower rate for your regular withholding, it could look like severance pay is taxed at a higher rate. 

If you receive severance pay as a lump sum, the payment might be subject to higher withholding because the payment reflects a higher tax bracket than the employee’s regular paychecks.

Severance pay is subject to the same taxes as your ordinary income – federal, state, and FICA (which covers the employee’s share of Social Security and Medicare). 

Can credit counseling help me if I’m past due on my accounts?

Many creditors work with credit counselors and are willing to make concessions if it will get them paid. Credit counseling can get your interest rates reduced, fees waived, and collection calls halted. Creditors are often willing to re-age your account, which brings its status to current. Eventually, you’ll catch up with your missed payments and pay your balance in full.

Will a secured credit card count toward my credit score?

Yes, as long as the card issuer reports your payment record to one or more of the big three credit bureaus. Also, even though you provide a deposit to secure the card, you’ll still have to make monthly payments. How reliably you make these payments will determine whether having the card helps your credit score.

When is a debt consolidation loan a bad idea?

You should never take a debt consolidation loan if you have an overspending problem. Many people overspend for different reasons – ignorance, not having a budget, or shopping addictions can get you into debt before you know it. You need to address the cause of your spending before taking on more debt to consolidate your balances. 

Learn how debt works and why it's costly to carry credit card balances. Get help with budgeting from a personal finance pro or a credit counselor. Tackle shopping addictions with a mental health provider. Debt consolidation can fail spectacularly if you don’t stop spending more than you earn first.

Why are my credit reports different?

Your three credit reports will probably be slightly different. That’s because creditors might report to CRAs at different times, which can affect the account balance that they report. Also, some creditors only report to one or two CRAs, so each report is likely to show different accounts and balances. 

What about debt consolidation loans for bad credit?

Most debt consolidation options are only available if you have good-to-excellent credit. Balance transfer cards and personal loans in particular will shut you out if your credit is not spotless. Home equity lenders can be more flexible if you have a lot of equity and your debt-to-income ratio meets their guidelines. Cash-out refinancing might also be available through government-backed refinance programs. 

If your credit score is low and not offset by home equity or high income, your best debt consolidation option may be a debt management plan. Your low credit score won’t keep you from being accepted, and your credit counselor may be able to negotiate concessions from your creditors like waived fees, lower interest rates, and re-aging of your account so that it’s no longer past due. 

Beware of ads for debt consolidation loans for bad credit or debt consolidation loans with no credit check. Those are likely to be title loans in disguise or loans with interest rates so high that it makes no sense to take them on. If your situation is so dire that you can’t be helped with a debt management plan, consider debt settlement or bankruptcy. 

How much does my credit rating matter?

Your credit rating matters a great deal. A good credit rating means you'll pay less for everything you finance -- cars, credit card purchases, homes bought with mortgages. According to MyFico, for example, borrowing $300,000 would cost a person in the 620-639 range over $100,000 more than the person with a 760 credit score.

In addition, a poor credit rating can make it difficult to work in certain industries, so it's good to establish and protect a good credit rating early on.

I might have too many credit cards. Would closing some of these accounts help my credit score?

While winnowing down your number of credit cards might help in the long run by making your credit usage easier to manage, be very careful of closing accounts when you’re trying to improve your credit score. Closing accounts could reduce the average age of your accounts and increase our credit utilization ratio. 

Either of those outcomes could have a negative impact on your credit score. Often, it’s better to simply stop using certain accounts without closing them right away. Once your balances are paid off, feel free to close the newest cards or those that charge fees.

How to pay off debt in collections?

There are different strategies for dealing with debt in collections, and the right one depends on a few factors:

  • Do you owe the money?

  • How old is the debt?

  • How owns the debt? The original creditor, a debt buyer, or a debt collector?

Assuming that you do owe the money and want to pay the collection, you may be able to settle the account for less than you owe. Or you may offer to pay more if the collector agrees to delete the collection from your credit history. 

How to pay off debt in collections with a debt buyer? Note that debt buyers may have purchased your account for pennies on the dollar and be willing to settle for much less than your balance. Collection departments from your bank or credit card issuer may be much less likely to negotiate. 

Understand that debt buyers often pay pennies on the dollar and are often willing to settle for a small percentage of the original amount due. Another factor is the age of the account and how soon the debt will become uncollectible – every state has a statute of limitations for debt, and once that period has passed, creditors cannot continue to pursue you for payment. 

The toughest collectors to deal with are likely to be original creditors. If your bank’s collection department is calling, the chance of them agreeing to accept much less than the full amount is lower. 

Can debt relief programs stop unwanted bill collector calls?

If you or a debt settlement company working for you negotiates a settlement with your creditor or debt collector, the calls should stop. However, debt settlement companies cannot guarantee that all collection calls will stop. 

The FDCPA regulates collection agencies and many debt buyers. All you have to do to stop calls from these people is to write a cease-and-desist letter and send it to them. If they ignore the letter, you probably have the right to sue them. 

However, the FDCPA does not apply to original creditors like your bank or credit card company. If you’re getting calls from the collection department of an original creditor, you can write them a cease-and-desist letter, and they might have to stop contact. Some states like California have laws like the FDCPA that cover original creditors. But without a state law protecting you, original creditors can be much more aggressive than debt collectors. 

Still, they can’t call any time they want, and they cannot be abusive. Laws that cover abuse by original creditors include the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, as well as other federal and state Unfair or Deceptive Practices Acts.

Does enrolling in a debt relief program stop collection calls?

You can stop calls from debt collectors by asking them to and by following up with a written cease-and-desist letter. If a debt collector continues to call, it’s a violation of the Fair Debt Collection Practices Act (FDCPA) and you could sue the collection agency for damages. 

However, the FDCPA doesn’t apply to primary creditors like your bank, personal loan provider, or credit card issuer. In many states, they can continue to call you whether you like it or not. And when you stop making payments to save for a debt settlement offer, your primary creditors will probably call you. 

That said, once you or your debt settlement company reaches a settlement with your creditor, there is no reason for collection calls. 

What are debt consolidation loan rates?

What are debt consolidation loan rates? It depends on the product and your credit rating. Secured loans like mortgages are less dependent on your credit rating than unsecured loans. Here are ranges for different debt consolidation loan products as of this writing:

  • Home equity loans: 5% to 10%

  • HELOCs (variable rate): Starting at 4%

  • Cash-out refinances: Starting at about 3% for a 15-year loan, 4.25% for a 30-year loan.

  • Personal loans: On average, personal loan rates run about 7% lower than those of comparable credit cards (24-36 month term)

  • Balance transfer cards: 0% starting rate, adjusted rate depends on your credit  rating and the issuer

Can adding a co-signer help you get approved for an unsecured loan?

Lenders pay strict attention to your credit score and history when you apply for an unsecured loan. That's because with no collateral, all they have to rely on is your promise to repay your loan. Your past payment history tells them how likely you are to keep that promise.

If you have a poor payment history and no collateral to pledge as security, adding a co-signer can convince a lender to take a chance on you. Of course, your co-signer is taking a big chance on you because co-signers get stuck for the loan if the primary borrower doesn't pay. And if you make late payments and the lender reports to credit bureaus, it can hurt your co-signer's credit score. So only add a co-signer if you are certain that you'll make your payments on time.

What kind of debt can I consolidate with a debt consolidation loan?

Most people consolidate unsecured debt like credit cars because their interest rates tend to be higher. But you can consolidate different types of debt, including credit cards, unsecured personal loans, and medical bills, tax debt, auto loans, business debt, and student loans.

What credit score do I need for a debt consolidation loan with bad credit?

LendingPoint allows credit scores as low as 580. BestEgg accepts credit scores as low as 600 and Upgrade goes as low as 560. You may get better rates with their secured personal loan products than their unsecured loans.

Will I be totally debt free when I am done?

Our program is focused on dealing with unsecured debts (credit cards, medical bills, unsecured personal loans, etc.). We can’t help with debt that is secured by collateral (such as mortgages or auto loans). However, after completing the program, the money you had been paying towards your unsecured creditors can be used to pay down secured debts and start saving for your financial future. Not everyone completes our program, so remember that sticking to your monthly savings plan is the most important factor in determining your success.

Do I have to close all of my credit cards in credit counseling?

Credit counselors recommend that you close credit cards to help get out of debt. And if you enroll debt in a debt management plan, you’ll be asked to close those accounts. But you might need to keep a card for business travel or for emergencies. In that case, don’t enroll that card in the plan. 

Is debt consolidation risky?

Debt consolidation is generally less risky than continuing to overpay for your debts. However, there are three things to watch out for. 1) If you pursue a DMP, beware of scams and check the record of the debt management company you work with. 2) Before you pull the trigger on a new loan, make sure the monthly payments fit your budget. 3) Make sure debt consolidation doesn’t simply free u

How long does debt consolidation take?

It may take years to fully pay down your existing debt. However, you should be able to set up a debt consolidation program in a matter of a few weeks and start to notice the benefits almost immediately.p room in your credit limits for more debt. 

What is the statute of limitations on debt?

Every state has laws limiting collection activity by creditors and debt collectors. Depending on the state and type of debt, statutes of limitation range from two to ten years. Once the statute of limitation of your debt is passed, creditors and debt collectors cannot sue you or continue contacting you.

However, any activity on the account, such as acknowledging that you owe the debt, promising to pay it, or making a partial payment, can restart the clock on the statute. So it’s important that you do not do those things until you are sure that you owe the money and that you want to repay it. If your debt is very old, you might choose to ignore it and let it die. 

What can I do if I think my credit score is wrong?

Get credit reports from each of the three credit bureaus. Check for inaccuracies. Not only might they be erroneously reporting a past credit problem, but they might reveal accounts you were unaware of that have been opened in your name. That can be a warning sign for fraud. First, contact any credit source that is showing inaccurate payment history or account information. Then, when you’ve cleared things up with them, contact each credit bureau that was reporting the inaccurate information. Keep written records of all these communications.

If I swear off using credit for six months, will that raise my credit score?

Cutting down on borrowing is often a key to long-term improvements in your credit score. If you’re trying to pay down balances, it’s important to stop adding to them. However, credit scores are based on using credit. Once your cards are paid off, you can use them if you pay the balances off each month. 

How many credit scores are there?

You have many different credit scores because there are many scoring models, and each model can be applied to credit reports from the three credit reporting agencies. 

The credit score that you get if you request a credit score is an “educational” score that lenders don’t use to make decisions. There are credit scoring models for different kinds of loans and for insurers and employers.

It makes sense, then, that you have many credit scores. FICO alone has 16 credit scores. VantageScore has four.  If there are 20 versions of credit scoring models applied to three reports, that’s 60 different credit scores!

But wait; there’s more. FICO has come out with newer scoring models, including the FICO Score 10 Suite which includes a base FICO Score 10, a FICO Score 10 T (which includes trended data), and new industry-specific scores. And FICO is rolling out its UltraFICO Score, which lets you link checking, savings, or money market accounts and incorporates banking activity. Lenders even create custom credit scoring models. 

Why are interest rates higher for unsecured loans?

Secured loans are safer for lenders because if the borrower defaults, the lender can simply take the collateral and sell it to recoup the loan balance.

The opposite of this is the unsecured loan. There is no property and the lender might have to sue to get repaid. In addition, the default rate is higher for unsecured debt. That means there is a greater chance that the borrower will not pay the loan back. Lenders must charge more to make up for the added risk.

Is debt consolidation a good idea even if I’m having no problem keeping up with my payments?

Absolutely. Debt consolidation isn’t just for people who are struggling with their debt. It can be a sound money-saving and organizing tactic for anyone with multiple debt balances. In particular, if you have high-interest debt like credit card debt, consolidation is worth a look. 

How long does debt settlement take?

It depends. You may be able to settle all accounts within weeks if you have access to a lump sum you can offer your creditors – for instance, a 401(k) account you can borrow against or savings account that you can tap. Otherwise, debt settlement timing depends on how long it takes you to save an amount to offer your creditors. 

You can speed this up by cutting spending, selling unused items, and taking on a side gig for more income. You’ll also stop paying your unsecured accounts and put that money into your debt settlement savings. Once you have saved enough, you or your debt settlement company can begin negotiating with your creditors. 

Most debt settlements take 24 to 48 months from beginning to end. 

What's more important? Saving or paying off debt?

It depends on how much you're paying to borrow and what kind of return you're getting on your investments. In general, however, interest rates on debt are higher than returns on safe investments. So it's usually smarter to pay debt than to save.

However, there are exceptions. if your company matches retirement contributions, you should take full advantage of that benefit.

What if I can’t qualify for debt consolidation loans?

If you're unable to qualify for a debt consolidation loan, you may be able to pursue a debt management plan (DMP) or debt settlement instead. A debt management plan allows you to combine your debt payments into one each month while potentially reducing interest rates and eliminating fees. This option might be right for you if you need debt relief and you can commit to an organized plan for paying back what you owe. 

Debt settlement allows you to pay back less than what you borrowed from your creditors. You can try to negotiate settlements with your creditors yourself or work with a debt relief company that will negotiate on your behalf. Debt settlement is usually geared toward people who have fallen behind on debt repayment and want to avoid bankruptcy. Talking over the options with a debt relief company can help you decide whether debt management or debt settlement makes sense for you. 

Does opening a new credit card affect my credit?

Opening a new card impacts your credit in two ways. First, an application for credit generates a hard inquiry on your credit report, and that drops your credit score by three to five points. And second, increasing your available credit drops your credit utilization ratio (as long as you don't increase your balances). Lowering your credit utilization ratio can increase your credit score quickly and significantly.

Should I request severance over several payments instead of a lump sum to save on taxes?

First, unless your income at year-end is higher than the previous years’ income, you’ll not be paying a higher tax rate. However, a lump sum can increase the percentage of your severance that the employer withholds for taxes. If your employer agrees, you could reduce this amount by taking your severance as a series of payments. Understand, however, that if you’re receiving regular severance payments from your employer, this might delay your eligibility for unemployment compensation in some states. 

How does a bad credit debt consolidation loan affect my credit?

A bad credit debt consolidation loan may hurt your credit score at first because the lender will pull your credit report and generate an inquiry in your credit history. That can cause your score to drop temporarily by about 5 points. 

However, consolidating credit card debt can increase your score quickly. That’s because 30% of your credit score depends on credit utilization. Credit utilization is the amount of available credit that you are actually using. So if you have $10,000 in credit lines and the total of your balances is $5,000, your credit utilization is 50%. Many people seeking debt consolidation are maxed out and their utilization is at 100%.

By consolidating your credit card debt with an installment loan or home equity loan, you zero out those balances and your utilization drops to zero. That can raise your credit score quickly. You might even qualify for a better debt consolidation loan in a few months. The trick is to make all debt payments on time and to avoid putting new balances on your credit cards.

How often can your bank account be garnished?

A creditor can make repeated requests for bank account garnishment until you repay all you owe. For that reason, you’ll want to stop all automatic deposits to accounts subject to bank levy or garnishment.

What’s the difference between debt consolidation and debt settlement?

Debt consolidation is a less drastic way to get rid of debt faster. When you consolidate your debt, you replace several payments with one. If your new loan has a lower rate, you can direct more money toward reducing your balances. But many people get into trouble with debt consolidation because they see zero balances on their credit cards and charge them up again. Then, they have their debt consolidation loan payment plus new balances on their cards.

It’s crucial to remember that debt consolidation does not reduce your debt. You still owe the money, and your balances are not reduced. 

Debt settlement is a process in which your debt balances can be negotiated down. You or your debt settlement company work with your creditors to create an agreement in which you pay less than your full balance and your creditor agrees to accept that amount as payment in full. Your creditors are under no obligation to accept a lower amount and are not required to negotiate with you. But successful negotiation can reduce your balances owed.

How to get debt collectors to stop calling work?

The FDCPA does not allow debt collectors to call you at any time or place that you tell them is “inconvenient.” If you don’t want calls at work, the law says that you only have to tell the collector not to call you at work. Write down the date and time you told the collector to stop calling. 

But what if a collector won’t stop calling you at work? In that case, keep a record of the time and date of any unwanted calls and write a cease-and-desist letter referencing the time and date you asked them to stop calling, noting the additional times and days that they called, and perhaps remaining them that the FDCPA allows you to recover up to $1,000 in statutory damages, plus court costs and attorney fees.

Do creditors settle with consumers who try DIY debt settlement?

Some do and some don’t. Every creditor has its own policy. Some do not settle debt, period. Others have relationships with debt settlement providers and are accustomed to working with them. The bottom line is that DIY debt settlement is possible and there is no reason not to attempt it. You can always hire a debt settlement company if you want professional assistance.

Can you combine debt consolidation loans?

Of course. You might try a balance transfer scheme to get zero interest for 18 months and then refinance the remaining balance with a personal loan. Or roll as much debt as you’re allowed into a home equity loan and pick up the rest with a personal loan or balance transfer.

Will debt collectors call me?

There are federal and state laws designed to protect you from collections harassment, but the fact is most of our clients will experience some collections calls. To help, we offer tools and guidance on how to handle those interactions. Learn more about laws that regulate debt collector behavior here.

What are the risks of debt consolidation?

The main risk of a debt consolidation loan is that you'll create new ones after you pay off your debts with the loan. For example, you might pay off $10,000 in credit card debt using a consolidation loan, then be tempted to make new purchases on the cards. For that reason, a debt consolidation loan may only be worth considering if you're committed to not creating new debt.

Do you guarantee you will settle all of my debts for a certain percentage?

No. Every case is a negotiation, and there is no guarantee as to how those negotiations will go. Furthermore, the success of our negotiations is highly dependent on your ability to save a specified amount each month you are in the program.

Can you stop a bank garnishment?

If your bank account is frozen, dispute the levy as soon as possible. Your account will remain frozen until the dispute is resolved, but the creditor won’t get your funds if your dispute is valid. Reasons for disputing a bank garnishment include:

  • Error: you don’t owe the money

  • The statutes of limitations have passed, and the debt is uncollectible

  • The creditor is already garnishing your wages

  • Some or all funds in your account are exempt under federal or state law

  • You’re a victim of identity theft, and the past-due account is not yours

Other ways to stop a bank garnishment include filing bankruptcy or settling with the creditor for an amount or payment that you can afford. 

How to qualify for a debt consolidation loan with bad credit?

Many lenders allow prequalifying for debt consolidation loans with bad credit. Just complete their online application. It’s helpful if you have an estimate of your credit score. Requesting a copy of your credit report and paying for your scores on should be your first step to qualify for a bad credit debt consolidation loan. 

You can offset a low credit score with good income and a low debt-to-income ratio (DTI). DTI equals your total debt payments (rent or mortgage, credit cards, auto loans, student loans, etc.) divided by your gross (before tax) income. Don’t count living expenses like food and utilities in your DTI. If your gross income is $4,000 per month, and your payments total $2,000 per month, your DTI is .5, or 50%. Most lenders prefer a DTI of 43% or less, but some will go as high as 50%.

Consolidating high-interest debt may worsen your DTI because debt consolidation loans can have higher payments even if your interest rate is lower. It depends on the length of your loan term. If you’ve been making minimum payments on your credit cards, you’re set up to be in debt for decades. If you transfer that debt to a five-year personal loan, the payment is likely to be higher even if the interest rate is lower. However, a fixed term does give you a solid end date for your debt, which credit cards don’t provide.

Does a debt consolidation loan affect your credit scores?

A debt consolidation loan can affect your credit scores in different ways. First, applying for a debt consolidation loan adds a hard inquiry to your credit reports, which drops your score 3-5 points. But more importantly, consolidating credit card debt drops your credit utilization ratio, which can improve your credit score substantially and quickly. 

Utilization is the percentage of revolving credit that you’re using. If you have $5,000 in available credit and your total balance is $4,000, your utilization is 80% ($4,000 balance divided by $5,000 available credit), which harms your credit scores. But if you pay those balances off with a debt consolidation loan, your utilization drops to zero. And if you pay them off with a $5,000 balance transfer card, your utilization falls to 40% ($4,000 balance divided by $10,000 available credit).

How long does a debt settlement stay on your credit report?

When you settle one of your debts, your creditor will update the status of your account to Settled, or some variation thereof.This status could stay on your credit report for up to seven years. Having an account settled has less of a credit impact than having an account with the status of Unpaid, but both are considered negative marks to your credit. However, by engaging in positive credit behavior over time, you may be able to improve your credit standing.

Is Freedom Debt Relief any good?

Yes! Freedom Debt Relief is committed to providing excellent service to our clients while we help them resolve their debt. Over 600,000 people have enrolled in our debt settlement program, so we must be doing something right. You can find reviews and success stories from clients we’ve helped overcome debt. But don’t just take our word for it: thousands of our clients have left glowing reviews of us on websites like TrustPilot and Consumer Affairs.

How much does debt relief cost?

In our program, clients pay no fees whatsoever until a debt is negotiated. You will know when fees are charged because you will approve every deal. Once we reach a settlement with a creditor, we immediately contact you for authorization. After you authorize the settlement, the fee associated with the debt is processed. All fees associated with the program are included in the monthly savings quoted to you by a debt consultant. Our fees usually range from 15% to 25%, but your rate may vary depending on your state of residency.

Can you settle credit card debt if you are still current?

Although it is possible to try to settle credit card debt if you are still current, it is unlikely that many creditors will be willing to accept less than the full amount owed if your payments are up to date.

Whether you settle your debt on your own or work with a debt settlement company like Freedom Debt Relief, the most effective way to get creditors to negotiate is by showing them you are unable to pay your debt in full due to a financial hardship. Letting your payments go into default is a good way to do this. Once your creditors understand that you are unable to pay in full, they are more likely to accept a reduced amount as settlement.

What is debt relief?

The type of debt relief Freedom Debt Relief offers is known by several names: debt resolution, debt negotiation, and debt settlement. Debt relief allows you to resolve your unsecured debt by negotiating with creditors and reducing the amount you owe. You could negotiate with your creditors on your own or use a debt relief program like Freedom Debt Relief to help you settle your debt.

During the debt relief process, you usually stop paying your creditors and start saving money in a special purpose account you will use to settle your debt. Once enough money is saved, either you or the debt relief company you hired contacts your creditors to negotiate a new debt amount that is lower than you currently owe.

How does Freedom Debt Relief work?

Freedom Debt Relief is the largest debt negotiator in the U.S. We offer our debt relief program to Americans with $7,500 or more in unsecured debt—including credit card debt, personal loan debt, and medical debt—who are experiencing a legitimate financial hardship.

The Freedom Debt Relief program is designed to resolve your debt for significantly less than you owe as quickly as possible. First, we provide a debt evaluation to help you decide if our program is right for you. If you decide that it is, we work with you to design a program that fits your monthly budget (keep in mind that it could be less than your monthly minimum payments). Once you enroll, our expert negotiators create a negotiation strategy designed to get you the results you want. Our company has used this method to resolve over $9 billion in debt since 2002. That’s much more than any other debt relief company in the industry.

What types of debt can you help me with?

Freedom Debt Relief could help you with debt from credit cards, medical bills, department store cards, and many other types of unsecured debt. Our program cannot help with a debt that involves collateral (like auto loans and mortgages). Also, we cannot resolve federal student loans. We do help with private student loans and some business debts on a case-by-case basis.

Are debt relief companies legitimate?

We approach everything we do with integrity, but sadly not all debt relief services have the same commitment to ethics we have. That’s why we encourage you to research every company you are considering before you commit to any debt relief program. As a founder of the American Fair Credit Council, Freedom Debt Relief has been involved in establishing industry standards that protect consumers from abusive debt settlement practices. We are a legitimate debt relief service that has helped tens of thousands of people resolve debt.

How do I choose a good debt relief company?

We recommend looking for debt relief programs that are transparent about the types of debt they accept, give a realistic timeline, and a realistic estimate of your potential savings. Additionally, debt relief companies are legally not allowed to charge fees until after a debt has been settled. We recommend you view the Federal Trade Commission’s advice.

Can a creditor sue me?

In a debt resolution program, you voluntarily stop making payments to your creditors so your accounts go past due. As a result, there’s a chance your creditors may take legal action to collect on the debt. Although we are not lawyers or licensed to practice law, we want to make sure that if any of your enrolled accounts go into litigation, the debt can still be negotiated. 

That’s why we’ve partnered with a network of attorneys, the Legal Partner Network, that specialize in debt negotiation. If a creditor takes legal action, we may engage a Legal Partner Network attorney who will attempt to negotiate a settlement with your creditor.

The cost of this service is included in the program and is available to all qualifying clients.

Will I have to take out another loan to cover my current debts?

No, our debt reduction program is not a new loan. Some of our clients use a loan in conjunction with the Freedom Debt Relief program, but most fund their settlements with a monthly deposit into their Dedicated Account. That being said, we do have a relationship with a lending company. And some clients, who demonstrate a consistent pattern of saving their monthly draft amount on time, may be eligible for a loan from this lender to pay off one or more of their settlements. But this is not something that is required of any Freedom Debt Relief client.

Should I include all of my credit cards in the program?

If you have one card with a low balance that you can quickly pay down to zero, then you may hold on to it for emergencies. The program will generally not work, however, unless you enroll all of your high balance (greater than $500) credit card accounts. Open credit cards make it difficult for us to negotiate with your creditors if they see you are settling on some accounts but not others.

Who controls the account where my funds are held while I await settlement?

You do. The bank account is set up in your name, and the money in the account is yours. We recommend keeping your funds in a new account, separate from your existing bank accounts because experience has shown this separation to dramatically increase the probability that you will succeed in the program. Freedom Debt Relief fees are deducted from this account on a debt-by-debt basis and only after each debt is settled, as indicated in the agreement you signed with us. But you still own the accumulated savings in the account.

Will I owe taxes on my forgiven debt?

The IRS considers a forgiven debt as taxable income, so at the end of the year they will expect taxes to be paid on the settlement. IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, may exempt you from this tax. Please contact a tax adviser to discuss this issue further.

Do interest and late fees accrue on my accounts?

If you let your accounts become delinquent, your creditors will continue to add interest and late fees onto your balances. Typically, your balance will increase until a settlement is reached. Keep in mind that the interest is going to accrue regardless of 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. When you work with Freedom Debt Relief, additional fees and interest that your creditor may charge is included in your estimate. Even if your creditor charges extra fees and interest, the fee we collect to settle the debt will not increase.

Can I negotiate on my own?

Yes you can. You can also do your own taxes and repair your own car, but most people would rather leave these tasks to experienced professionals. The Freedom Debt Relief team of negotiation specialists resolve over $288 million in debt each month. Our knowledge and experience puts us in a strong position to stand up to your creditors and fight for the best settlement possible.

Do you start negotiating with my creditors right away?

Negotiation activity is typically very limited until you have saved up enough in your settlement account to make reasonable offers to your creditors. Most (but not all) creditors do not want to spend time negotiating an account unless they know there are funds available. The first settlement typically happens between months four and six of a client’s program, but this varies greatly depending on your monthly deposit amount, the number of creditors you have enrolled in the program, and the balance of each individual account. In some instances, it may take more than six months before the first settlement is reached.

How do I qualify for legal representation?

To qualify for the Legal Partner Network service, you must have made all your program deposits on time and in the full amount. It’s important that there are enough funds available to negotiate a settlement if needed. Consistent deposits are crucial to overall program success and create negotiating leverage for attorneys to work on your behalf.

Get started now and see how much you can save!