How do debt relief programs actually work? 

At their core, most debt relief solutions from revolve around two primary strategies: 

• Debt settlement: These firms negotiate lump-sum settlements with your creditors for less than the full outstanding balance, allowing you to settle debts for a lower amount that’s more affordable. 

• Debt consolidation: By consolidating all your debts into one new streamlined payment, either a loan or unified debt management plan, the goal is simplifying cash flow with an ideally lower interest rate. 

While methodologies differ, most debt settlement companies follow a similar process: 

• You begin depositing funds every month into a dedicated account which builds up a settlement fund. 

• The debt firm initiates negotiations with creditors once the settlement fund reaches a target threshold, usually 6-12 months into the program. 

• They aim to reach settlement agreements with each creditor, typically negotiating payoff percentages of 40%-60% of balances depending on your situation. 

• You pay the agreed settlement amount to creditors, who then absolve remaining balances as resolved. 

The advantages of debt relief programs 

While subjecting yourself to a lengthy debt relief process may seem daunting, having professionals on your side does provide some compelling benefits versus trying to DIY debt settlement: 

• Relief from harassment: The debt settlement company that you decide to work with will call your creditors to negotiate. You can also request that your creditors reach out to them instead of you regarding your enrolled debts. 

• Lower total debt costs: The negotiation expertise of debt relief professionals often results in settling total obligations for lower lump sums than you could on your own. Less total repayment saves money. In the best-case scenarios, debt relief programs can indeed slash consumer debts in half or more through strategic negotiation. 

• Manageable payment schedule: Your debt settlement program will have one monthly program payment that fits your budget.  

The downsides to debt relief programs 

While the allure of cutting your debt burden up to half is understandably tantalizing, enlisting in debt settlement comes with some financial side effects you have to withstand: 

• Credit impact: By design, debt relief programs often require you to stop paying creditors entirely during the negotiation stage which damages credit with late payments and potential charge-offs. 

• Potential tax liability: Any debt settled or forgiven over $600 is considered taxable income by the IRS which you’re on the hook for come tax time each year until the debt relief program concludes. 

• 3+ year program length: From building a settlement fund to finalizing negotiations, most debt relief companies warn it takes an average of 24-48 months to complete their program depending on amounts owed. Of course, 24-48 months is a lot better than enduring indefinite years of debt, but just be aware that there’s no overnight solutions.  

Work with an industry leader 

You know our famous jingle, so isn’t it time you got to know why JG Wentworth has become synonymous with debt relief and structured settlements? Give us a call to speak with one of our dedicated debt relief specialists. If you have $10,000 or more in unsecured debt, you may be eligible for our Debt Relief Program.* Some basic perks to consider: 

• One monthly program payment 

• We negotiate on your behalf 

• Average debt resolution in as little as 48-60 months 

• 24/7 support 

• We only get paid if we settle your debt 

If you think you qualify for our program, give us a call today so we can go over the best options for your specific financial needs. Why go it alone when you can have a dedicated team on your side, helping you accelerate your return to financial freedom?