1. DEBT RELIEF

What’s it Like to Go Through Debt Relief?

What's it like to go through debt relief?
Key Takeaways:
  • Debt relief is an emotional journey with distinct stages.
  • Debt relief takes time, but could improve your financial future.
  • The debt relief journey may produce feelings of relief and accomplishment.

Being overwhelmed by debt feels miserable. There are no easy answers for breaking out of that rut. However, if you’re ready to make a commitment to your financial future, a debt relief program can be very rewarding.

In addition to the logistics of debt relief, you should be prepared for an emotional journey. It takes focus and patience to get through conquering your debt. When you reach the other side, though, you might feel as if the weight of the world has been lifted from your shoulders. 

As with any long journey, breaking it up into shorter legs can make it more manageable. You can get a sense of what to expect and how you’re likely to feel each step of the way. This can give you the reassurance of knowing you’re on the right track. 

Stage 1: Get organized

Part of the stress that comes with too much debt is feeling that things are out of control. Solving the problem starts with getting organized. 

What to expect

You’ll need to spend some time combing through the details. Gather details on each of your debt accounts: balances, account numbers, repayment terms, contact information, and so on.

At this stage, you’ll also want to identify which debts are good candidates for debt relief. Secured debt is not well suited for negotiating with creditors. Your unsecured debts are better possibilities for this process.

The other item on your checklist is finding a good debt relief firm, one that’s reputable and experienced. You’ll work with them to create a plan that you believe in.

How you might feel

This is the most hands-on stage for you. You might find this detail work a little boring. Many people find it empowering to get organized and make a plan. For the first time since your debt problems began, you might feel you are on the path toward solving your problem.

Debt relief stage 2: Wait and save

Debt relief doesn’t happen overnight. Once you get everything organized, you can start negotiating with creditors. Still, it may take a while before they're even willing to consider a settlement offer and even longer for them to approve one.

What to expect

The toughest part of this waiting game is that you may continue to be harassed for payments while you work on your debt strategy. 

Some people who enroll in a debt settlement program choose to stop paying their debts so that they can instead set aside money for making settlement offers.  Any time you miss a payment, your credit standing will likely suffer. And creditors may pursue you for the debts.

At the same time, if you clearly can’t afford to fully repay your debts, your creditors may eventually become willing to negotiate. They may realize that accepting a lesser amount might be their best chance of getting any payment.

During this stage, take the money you would have made toward payments and put it into a dedicated account set up by the debt settlement company. They’ll use this money later to settle debts.  An available lump sum may well improve your bargaining position. 

How you might feel

Emotionally, this could be the lowest point of the process. Nobody likes to be harassed for payments. It’s tough to stay disciplined while you’re waiting for the process to begin showing results. The good news about low points is that when you reach them, there’s nowhere to go but up.

At this stage, working with a debt relief professional can be really helpful. It gives you someone to lean on during the tough times. A professional who has been through the process can give you the perspective to see that everything you're going through has a goal. Instead of just spinning your wheels, you’re now working on a solution. 

Debt relief stage 3: Knock down debts

Assuming you have multiple creditors, the third stage of the process could be a mixed bag. The waiting game will continue, but you should start to see the first signs of success.

What to expect

Not all of your creditors are likely to agree to settlement offers at the same time. Expect some negotiations to reach a conclusion while others drag on. 

During this stage, you may have to consider counteroffers from creditors. They may agree to cut your debt, but not by as much as you’d originally hoped. You’ll need to reassess your financial situation to decide which counteroffers to accept. Then you’ll have to figure out how that affects your ability to settle with other creditors. 

How you might feel

When the first creditor accepts a settlement offer, for the first time in years you could start to feel some relief about your debt situation. Now you’re seeing the process start to work. Suddenly, the amount you owe will be heading in the right direction (down). 

Debt relief stage 4: Back on track

Every time you settle one of your debts, you’ll be one step closer to your goal. The hardest part—getting started—is over. 

What to expect

Each time a creditor accepts a settlement offer, the debt settlement company will present it to you for approval. Your creditor might accept a lump sum for less than you owe, or a series of payments. Once you approve the agreement and at least one payment is made, the debt settlement company will take its fee from your dedicated account.

Settling debts won’t immediately repair your credit. However, it will help you move forward to a better financial future. That will allow you to start building a positive payment history. In time, that should allow your credit score to start making progress. 

How you might feel

Elated. Hopeful. Resolving any problem can bring relief. People who enter debt settlement have often been dealing with debt problems for years. The relief of resolving those problems can feel life-changing. 

You should give yourself a big pat on the back. You had a problem, and even though it wasn’t easy you took care of it. That’s a huge accomplishment.

A look into the world of debt relief seekers

We looked at a sample of data from Freedom Debt Relief of people seeking debt relief during June 2024. This data highlights the wide range of individuals turning to debt relief.

Credit utilization and debt relief

How are people using their credit before seeking help? Credit utilization measures how much of a credit line is being used. For example, if you have a credit line of $10,000 and your balance is $3,000, that is a credit utilization of 30%. High credit utilization often signals financial stress. We have looked at people who are seeking debt relief and their credit utilization. (Low credit utilization is 30% or less, medium is between 30% and 50%, high is between 50% and 100%, and very high is over 100%). In June 2024, people seeking debt relief had an average of 81% credit utilization. Here are some interesting numbers:

  • 47% of the people fell into the high utilization bucket.

  • 21% of people used 30% or less of their credit lines.

  • 21% had very high credit utilization.

You don't have to have high credit utilization to look for a debt relief solution. There are a number of solutions for people, whether they have maxed out their credit cards or still have a significant part available.

Regain Financial Freedom

Seeking debt relief can be the first step toward financial freedom. Are you struggling with debt? Explore options for debt relief to regain control of your finances. It doesn't matter how old you are or what your FICO score or credit utilization is. Take the first step towards a brighter financial future today.

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