How do debt relief companies negotiate settlements with your creditors?
Debt relief companies negotiate with creditors by first having clients stop making payments to their creditors and instead save money in a dedicated account, creating delinquency that gives leverage for settlements after 90 to 180 days. Once an account is sufficiently delinquent and enough funds are saved, the company negotiates lump-sum settlements, typically between 50% and 70% of the original balance, on the client's behalf. These agreements require client approval, and upon settlement, the debt relief company pays the creditor from the savings and collects its fee from the same account.
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MoneyWatch: Managing Your Money How do debt relief companies negotiate settlements with your creditors? We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. .chip { background-image: url('/fly/bundles/cbsnewscore/images/chip-bgd/chip-bgd-moneywatch.jpg'); } By Angelica Leicht Angelica Leicht Senior Editor, Managing Your Money Angelica Leicht is the senior editor for the Managing Your Money section for CBSNews.com, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.
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