Settlement
Settlement summary:
A settlement is a negotiated agreement for you to pay less than the full amount you owe, but the creditor accepts it as payment in full.
Settlements only work for unsecured debts like credit cards, medical bills, and most personal loans.
A professional debt relief company can streamline the settlement process by creating a customized plan, negotiating with creditors, and processing payments once settlement offers are approved.
Settlement definition and meaning
A settlement is an agreement that you or a debt relief company negotiates with your creditor to reduce what you owe on a debt. After all settlement amounts have been paid, the rest of your debt is forgiven and the balance is zeroed out.
In many cases, the settlement is a single payment for a lump sum. Sometimes, however, the creditor will accept a series of payments.
Key concept: When you successfully negotiate a debt with a creditor, a settlement is the amount of money you'll pay to clear your debt—less than the full sum you owe.
More about settlement
Settlement is the successful outcome of a debt negotiation with your creditors. The goal is for you or a debt relief company that works for you to get your creditor to accept less than the amount you owe as payment in full.
It's important to know that you can only get settlements for unsecured debt like credit card balances, personal loans, and medical debt—not secured loans like auto financing.
Often, the settlement is a lump sum. You may be able to withdraw funds from savings or save money over time until you have enough to offer your creditor.
Creditors don't have to negotiate with you or offer you a settlement, but many will, especially if you can show that you're going through a financial hardship that qualifies. You're not required to accept a settlement offer from a creditor unless you agree to it.
A successful negotiation and settlement could clear your debt for less than you owe and help you zero your balance faster than by making minimum payments.
How does a professional debt relief company help you get a settlement?
A debt expert talks to you and creates a custom plan based on your income and expenses.
The debt relief company sets up a dedicated account where you’ll make one affordable monthly deposit, often less than your minimum monthly payments.
An expert negotiator works with your creditors to reduce your debt and reach settlement agreements.
You'll be notified whenever a settlement offer comes in.
If you approve the offer, you'll authorize the payment from your account. The company’s fees are also paid from this account.
Settlement FAQs
Is an acceleration loan a debt consolidation loan?
Yes. An acceleration loan is an unsecured personal loan for debt consolidation. It’s a tool that could help you resolve your enrolled debts faster. You only take out the loan for the amount you need to pay all your negotiated settlements—which may not be the full amount of the debts you enrolled.
An acceleration loan is different from other debt consolidation loans. Credit scores aren't a major factor in deciding whether an applicant is eligible. The minimum credit score required is only 350. People who have made all of their debt relief program deposits on time may be offered an invitation to apply.
Can I negotiate a settlement after being served?
Absolutely—especially after you respond to the summons and let the debt collector know you plan to fight the lawsuit. It costs money to go to court, and there’s no guarantee of winning or collecting a judgment. If you can convince a creditor that you can’t afford to pay the entire amount owed or that you need more time to pay, they might work with you.
Achieve Debt Relief clients who have made all their program payments get a special benefit. Achieve partners with debt attorneys who may assist if a creditor sues you while you’re in the program. They won't represent you in court, but will attempt to negotiate an agreement with your creditors so that you don’t have to go to court.
You can’t enroll a debt in the Achieve Debt Relief program if you’ve already been served with a lawsuit for that debt.
What percentage will most creditors settle for?
Creditors aren't required to settle with you at all. There’s no guarantee they will. However, the American Fair Credit Council states the average creditor settlement amount is 48% of the balance owed. Debt collectors may accept even less.
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