Debt resolution program: how it works and what to expect

You have debt, and you're ready to do something about it. That's huge. Now you just need to decide which debt solution makes the most sense. 

Maybe you've heard about the benefits of a debt resolution program to get on track. Only you're not sure how it works or whether it's a legit way to tackle your debt. 

We're here to help you figure it out. Let's dig into the details of how debt resolution works and whether it might be right for you. 

What is a debt resolution program? 

A debt resolution program is a legal way to get rid of debt without full payment. 

When you resolve debt, your creditors agree to accept less than what's owed. Why would a creditor agree to this? Because they may believe that it’s their best chance of getting anything at all. They may consider it if you are experiencing financial hardship. 

Once you pay the agreed-upon amount, the rest of the balance is forgiven. Your creditors are satisfied, and you're no longer burdened by debt—it's a win for both sides. It might sound too good to be true, but debt resolution is a proven way to deal with overwhelming debt. 

Debts that are eligible for resolution include unsecured debts such as:

• Credit cards

• Department store credit cards

• Medical bills

• Most personal loans

• Collections accounts 

• Some payday loans

• Personal lines of credit

• Some private student loans

You might be eligible for a debt resolution program if you have these kinds of debt, even if you have bad credit. 

Who debt resolution helps

Debt resolution may be a strategy worth considering if these apply to you:

You have significant unsecured debt

People who enroll in a debt resolution program typically have a significant amount (at least $7,500) of unsecured debt. The people Achieve Resolution helps have, on average, around $25,000 of debt across 6-10 different accounts.

You’re struggling financially

If you’re struggling to make your minimum monthly payments or have already fallen behind, debt resolution may be a path to consider.

You have a hardship

Debt resolution could help someone experiencing a significant financial hardship that makes it difficult or impossible to fully repay their debts. Hardships that could qualify for debt resolution include:

• Job loss/reduced hours

• Death of a breadwinner

• Divorce

• Medical emergency or large medical expense

• An unexpected and unavoidable major expense

How a debt resolution program works

Debt resolution works in one of two ways. You could negotiate with creditors yourself or allow a debt resolution company to negotiate on your behalf

Let's assume that you decide to work with a debt resolution company. Here's what you could expect from the resolution process. 

1. Start with a debt consultation—most reputable companies provide this for free. You’ll speak with a Certified Debt Consultant about your options and work with them to create a debt resolution plan.

2. Make regular deposits. Each month, you'll deposit a set amount of money into a dedicated program account to build up funds. These funds will be used to pay your creditors once a settlement has been reached.

3. Negotiate with creditors. The debt resolution company negotiates with each of your creditors to reach agreements on how much they will accept to consider each debt resolved (paid in full). They may agree to a single lump sum payment, or to a series of payments. 

4. Review and approve agreements. Once an agreement is reached, you get a chance to review it. Once you approve it, the debt resolution company uses funds from your dedicated account to pay the negotiated amount to your creditor. 

5. Move on to the next debt. The process is repeated until all the debts you included in the program are resolved—and then you're free of those debts. 

A debt payoff calculator could help you estimate what you might save with a debt resolution program. You simply plug in the amount of debt you want to resolve to see your new monthly payments and amount of total debt repaid. 

The role of debt resolution companies

Debt resolution companies could help you get a better handle on your situation. Here are some of the main advantages to know. 

• When you work with a reputable company, you'll have a certified debt consultant on your side. 

• Your debt consultant could evaluate your financial situation and help you determine if debt resolution makes sense or if there's another solution that might be a better fit. 

• If you decide to move ahead with debt resolution, you don't have to deal with the stress of negotiating with creditors directly, which can take time.

• Professional debt negotiators work with your creditors on your behalf to help get you the best terms possible. 

There are some limitations. Enrolling in a debt resolution program doesn't prevent creditors from contacting you about the debt. 

Being in a debt resolution program also won't prevent you from being sued by creditors if that’s the course of action they choose to take. But if you’re working with a reputable debt resolution company, you may be able to get free legal services when you’re faced with creditor lawsuits. At Achieve, we've partnered with the Legal Partner Network, a network of attorneys who specialize in negotiating debts. If an enrolled creditor files a lawsuit against you, we may engage a Legal Partner Network attorney to negotiate a settlement.

The Legal Partner Network service is available to members who make all their deposits on time and in full. The cost is included (without any subscription or service fees). It’s a great reason to choose the Achieve Resolution program. The attorney will focus on trying to get the creditor to settle the lawsuit and resolve the debt. However, the attorney won't represent you in court or file paperwork.

How do you find a legitimate debt resolution company to work with? 

Here are some positive signs to look for in a debt resolution company:

• Debt consultants or experts are certified and credentialed.

• Free consultations are offered with no obligation.

• The company is licensed to do business in your state.

• The company is Better Business Bureau-certified or has a positive BBB rating.

• Consumer reviews and ratings on sites like Trustpilot indicate a high level of satisfaction.

Reputable debt resolution companies are transparent when it comes to the services they offer and the fees they charge. They readily answer questions and never ask for money up front.  

The potential benefits of enrollment in a debt resolution program

Emotional impact

Debt resolution programs could help you in more ways than one. For example, let's start with the emotional payoff.

When you take steps to resolve your debt, that could instantly lift some of the mental stress you might experience. Instead of giving in to debt shame and beating yourself up about your debt, you can be proud of yourself because you've taken control of your situation. That's worth its weight in gold, even before you factor in the financial impacts.

Working with a professional debt resolution company also means you have support during what may be a trying time. It could be reassuring to know that you have expert help in your corner to guide you through the process.

Financial impact

Debt resolution could help you pay off what you owe faster compared to slogging along with minimum payments for who knows how long. 

Depending on your current monthly payments, a debt resolution program could free up cash flow in your monthly budget, bringing you welcome relief. Making only one affordable program deposit could help you keep up with other bills that aren’t eligible for debt resolution (like a car loan).

You could avoid bankruptcy if you've decided that it's not right for you. And once your debt is behind you, you're free to focus on other financial priorities. 

Debt resolution program fees and risks

Debt resolution companies charge fees for their services. A typical fee range is 15% to 25% of the enrolled debt.

The fees you pay are usually rolled into the plan. When the debt resolution company successfully negotiates a debt (and you approve it), the negotiated amount and the fee are both paid from your dedicated account.

Pro tip: By law, debt resolution companies can only charge you after they've negotiated an agreement with a creditor, you've approved it, and at least one payment has been made from your dedicated account.

As far as the risks go, we've already mentioned that debt resolution doesn't bar a creditor from pursuing collection actions against you or even suing you. 

Aside from that, debt resolution could negatively impact your credit scores. 

When you stop paying creditors, late or missed payments could be reported to the credit bureaus. That could drag down your scores, but it doesn’t have to be permanent. You could fix your credit after debt resolution, though it may take time. 

In the short-term, your financial health may be the more important thing to focus on. Resolving debts could help you get a handle on your finances. Then you’ll be in a much better position to improve your credit standing by paying all your bills on time and keeping your debts low.

How to avoid debt resolution scams

Unfortunately, debt relief scams are out there. Here are some warning signs to watch out for:

• No accreditation. Reputable debt resolution companies are accredited, which means they're officially recognized as legitimate. The American Association for Debt Resolution (AADR) offers accreditation for debt resolution companies. 

• Demand for payment. Any time you're asked for payment up front without services rendered for debt resolution, that's a big red flag (and illegal). It's also wise to steer clear of companies that ask you to use unusual methods to pay or that only accept cryptocurrency. 

• High-pressure tactics. Legitimate debt resolution companies won't chase you down or try to bully you into using their services. Instead, they'll look at your finances and give you some options for how to manage debt, then allow you to choose whether you want to work with them or not. 

• Unrealistic guarantees. Here's a simple rule to remember when dealing with debt resolution companies: If it sounds too good to be true, it probably is. A good debt resolution company will never tell you that it can do things for you that aren't possible. 

What's next

• Make a list of your debts and the amounts you owe to decide if you might be a candidate for debt resolution. 

• Use a debt payoff calculator to estimate what you could save with debt resolution. 

• Get a free consultation with a certified debt expert to discuss whether debt resolution is right for you.