- Financial Term Glossary
- Debt Resolution
Debt Resolution
Debt resolution summary:
Debt resolution allows you to pay less than what you owe and have the rest of the debt forgiven.
Creditors might agree to resolve debts if they don't believe they can collect the full amount owed.
You can negotiate to resolve debts yourself or get help from a professional debt resolution company.
Debt resolution definition and meaning
Debt resolution is a legitimate way to get rid of debt without paying in full. When you resolve debt, your creditor agrees to accept a percentage of the amount owed. The rest of the debt is forgiven and you don't have to pay it.
You can negotiate to resolve your own debts, or you can get help from a debt resolution company.
Key concept
Debt resolution is a legal way to reduce the amount of debt you owe.
More about debt resolution
Debt resolution is a way you could significantly reduce the amount of debt you have to repay to your creditors. It's 100% legal to resolve debts. Your creditors just have to agree to accept less than what you owe. The rest is written off, which saves you money and helps you get on the path to a better financial future.
If you have a financial hardship and are overwhelmed by what you owe, debt resolution could be a lifeline.
Comprehensive breakdown of debt resolution
Anyone can try to resolve their own debts. But it can be a tiring, intimidating process. Creditors want their money. They’re likely to play hardball and push you to pay your full debt, or close to it. To get partial debt forgiveness, you’ll probably have to engage in several rounds of communication and assertively advocate for yourself. All at a time when you’re probably feeling at least some of the negative emotions that go along with severe financial distress.
If you don't feel comfortable doing your own debt negotiations, you could ask a debt resolution company for help. Here's how the process works if you go the expert route.
You tell the debt resolution company about your financial situation and get a free debt analysis. If you're a candidate, you let them know which debts you want to enroll in your plan.
The debt resolution company opens a dedicated account for you that you control. This is an account at a partner bank that you own and control. It’s just for building up funds to offer your creditors.
You make affordable monthly deposits, typically by electronic transfer from your everyday checking account.
The debt resolution company negotiates with your creditors to reduce what you owe.
Once an agreement is reached and you approve it, the debt resolution company uses money in your dedicated account to pay your creditors.
The rest of the debt balance is forgiven.
The process is rinse and repeat until all your enrolled debts are resolved.
Professional debt resolution relieves the stress of dealing with your creditors directly. A good debt resolution company should already have relationships with all or most of your creditors and might be able to get better results than you could get for yourself.
Debt resolution companies charge fees. A reputable company won't charge you until an agreement is reached, you approve it, and at least one payment is made toward it.
How long does it take to pay off debt? Most people who enroll in a debt resolution program resolve their first debt within a few months. Overall, it typically takes two to four years to negotiate all of your enrolled debts.
Key aspects of debt resolution
Debt resolution is distinct from other types of debt relief, like debt consolidation or debt management plans. Here are a few helpful tips to know.
A debt resolution company can help you resolve unsecured debts, like credit cards, installment loans, personal loans, medical bills, or certain payday loans.
You might need a minimum amount of debt to get help from a debt resolution company. (Achieve, for example, enrolls members with $7,500+ in unsecured debt.)
You don’t need good credit for debt resolution. You just need the right type and amount of debt to qualify.
Debt resolution is for people who have a financial hardship and can’t afford to fully repay their debts.
Forgiven debt may be taxable for some people.
Debt resolution won't stop a creditor lawsuit. Only bankruptcy can do that.
Debt resolution isn't right for everyone, but it may be worth exploring if you need help with credit cards or other debts. Schedule a free debt evaluation to find out if you’re a candidate.
Debt Resolution FAQs
Are all types of debt eligible for debt resolution?
No. The following types of debt are generally ineligible for debt resolution programs:
Secured debt, like a mortgage, HELOC, or auto loan
Federal student loans
Tax debt
Utility bills
Legal judgments
Debt incurred by a business you own or through self-employment work
Debt resolution programs could address unsecured debts such as:
Credit cards or department store cards
Medical bills
Most personal loans
Collections or repossessions
Lines of credit
Some payday loans
Some private student loan debt
No creditor is obligated to help you resolve a debt for less than the full amount.
Are debt resolution programs legit?
Yes, debt resolution programs are legit, but it’s up to you to choose a reputable company and program.
Keep an eye out for red flags associated with scams. Be careful of any company that:
Wants you to pay a fee before they've settled any debt (it’s illegal).
Claims there's a new government program that'll bail you out of personal debt (there isn’t).
Guarantees they can make your debt go away (it's up to the creditor).
Insists you stop communicating with your creditors.
Tells you they can stop all debt collection calls and lawsuits.
If you decide to work with a debt resolution company, first investigate its business practices and find independent reviews.
Is debt resolution worth it?
Debt resolution could be worth it if you’re experiencing a hardship that makes it difficult or impossible to fully repay your debts. You may also consider debt resolution if you've looked at other options like debt consolidation or bankruptcy and decided they aren't the best fit for your situation.
Related Articles
Your income and your history of paying your bills could be enough to qualify you to take on unsecured debt. Learn more about how it works.

If you’re struggling to make your minimum debt payments, you may be able to negotiate with your creditors yourself. Here are a few tips.

If you’re experiencing financial hardship, your creditors might agree to let you resolve your debt for less than you owe. Here’s how debt resolution works.
