Debt settlement
How debt settlement works
What actually happens, in order: the first call, the account in your name, the negotiations, the approval you give before every payment, and what is left when the last account settles.
What happens before you enroll?
It starts with a free call. A real person goes through your debts with you: who you owe, how much, and how far behind you are. We check your state first, because debt settlement is not available everywhere.
You then see an illustrative estimate with the fee as its own line. If settlement is not right for you, we say so and point you somewhere better, such as a nonprofit credit counselor.
Before you enroll with any company, federal rules require it to tell you four things (FTC, opens in a new tab): how long the program will take, how much you must save before each offer, that the program can hurt your credit and lead to collection or lawsuits, and your rights over the account that holds your money.
Nothing is signed on the first call. You can ask questions and walk away.
Where does your monthly deposit go?
Your deposit goes into a dedicated account, not to us. A dedicated account in your name at a federally insured bank, held by an independent processor, that you can view online 24/7. The money in it is yours.
The federal rule (eCFR, opens in a new tab) says you can withdraw from a program at any time without a penalty. You then get your money back within seven business days, minus only fees already earned for settlements you approved.
| Who | What they do |
|---|---|
| You | Make one monthly deposit, watch the balance online, approve each settlement. |
| The independent account provider | Holds the account at a federally insured bank and sends approved payments. |
| Clear Financial Company | Negotiates with your creditors. Never holds your money. |
How do the negotiations work, month by month?
We negotiate once your account holds enough to make a real offer on a debt. Smaller balances often settle first, because they need less saved. Each creditor is a separate conversation with its own result.
- Day 1
A free consultation
Your debts, your state and an illustrative estimate, fee included.
- Week 1
Your account opens
The first deposit goes into the account in your name.
- Month 2 on
We negotiate
When there is enough saved for an offer, we contact that creditor.
- Every offer
You approve it, or not
You see the creditor, the settled amount and the fee in dollars before anything is paid.
Your yes, every time - Months 24 to 48
Accounts resolve one by one
Most programs run 24 to 48 months. Each settled account comes off the list.
The timing above is illustrative2. Your first settlement depends on your deposits and on your creditors.
What do you see before a settlement is paid?
Every offer comes to you before any money moves. You can say yes, or ask us to keep negotiating.
- The creditor and the account the offer covers.
- The settled amount, and whether it is paid at once or in installments.
- Our fee for that settlement, in dollars. The fee is a percentage of your enrolled debt, set individually, and charged only after a settlement is reached.
- The settlement terms in writing from the creditor, before the first payment.
Nothing is paid to a creditor without your approval.
What happens to your accounts while you save?
This is the hard part, and you should know it before you start. While you save, the enrolled accounts usually fall further behind. That is what makes creditors willing to settle, and it is also why the program has real costs.
- Your credit score drops as late payments are reported.
- Interest and late fees can keep adding to your balances until each account settles.
- Collectors may keep calling. You still have your rights under federal debt collection law (CFPB, opens in a new tab).
- A creditor can sue. If you are served, call us the same day and think about talking to an attorney.
If you miss a deposit, tell us. Call us and we'll adjust the schedule. You won't be dropped.
What happens when the last account settles?
Each settled account is reported as settled or paid for less than the full balance. Most negative items can stay on your credit report for up to seven years (CFPB, opens in a new tab), and your score can recover over time as you pay new bills on time.
Forgiven debt may count as income. A creditor that cancels $600 or more may send you Form 1099-C (IRS, opens in a new tab), so talk to a tax professional before tax season.
Things you should know
The downsides, stated plainly.
Read these before you enroll anywhere, including with us. They apply to every debt settlement program.
- Your credit score will drop during the program, and late payments stay on your credit report.
- Creditors may keep collecting while you save, and they can sue. The program does not stop legal action.
- Interest and late fees can keep adding to your balances until each account settles.
- Forgiven debt may be taxable income. A creditor may send you IRS Form 1099-C.
- Fees apply. The fee is a percentage of your enrolled debt, set individually, and charged only after a settlement is reached.
- Not all creditors agree to settle, and not everyone completes the program.
- We do not guarantee any amount, percentage or timeline.
- Debt settlement is not available in all states. We are not a nonprofit or a credit counseling service, and we do not lend money.
- We do not give legal or tax advice. Talk to an attorney or a tax professional about your situation.
Notes on the figures and claims above
- 1Your credit score will drop during the program. Creditors may continue collection activity and can sue. Forgiven debt may be taxable income (IRS Form 1099-C). Fees apply. Not all creditors agree to settle. Most programs run 24 to 48 months.
- 2Figures on this site are illustrations, not offers or guarantees. Results vary; not all debts settle. Estimates assume creditors settle for 45 to 60% of enrolled balances (typical) or 80% (conservative, a 20% reduction), plus an illustrative fee of 20% of enrolled debt. The actual fee is a percentage of enrolled debt, set individually and charged only after a settlement is reached; your written agreement states it.
Do I stop paying my creditors?
Your monthly deposit goes into your own account instead of to the enrolled creditors. That is how offers get funded, and it is also why your credit score drops.
Who holds my money?
A dedicated account in your name at a federally insured bank, held by an independent processor, that you can view online 24/7. We never hold it.
Do I have to enroll every creditor?
No. You don't have to enroll every creditor. We can talk through which accounts make sense to include.
What if a creditor will not settle?
Some creditors refuse. If one does, we tell you, and we talk through your options for that account, including leaving it out.
Sources
Where the facts on this page come from. Each link opens the original in a new tab.
- 01 eCFR 16 CFR 310.4: Abusive telemarketing acts or practices (the advance-fee ban) (opens in a new tab)
- 02 FTC Debt Relief Services and the Telemarketing Sales Rule: A Guide for Business (opens in a new tab)
- 03 CFPB What is a debt relief program and how do I know if I should use one? (opens in a new tab)
- 04 CFPB Debt collection: consumer tools (opens in a new tab)
- 05 IRS About Form 1099-C, Cancellation of Debt (opens in a new tab)
- 06 CFPB How long does information stay on my credit report? (opens in a new tab)
Next step
Ready for a clearer horizon?
Check your state, see your estimate, then decide. Nothing is signed until you say yes.
Four short steps
Your estimate first. Contact details last.
- 1How much you owea close guess is fine
- 2What kinds of debtpick all that apply
- 3Which state you live inchecked before anything else
- 4Your estimate, then a real person if you want one