Debt Settlement – To Settle Or Not To Settle

What Is Debt Settlement?

First off, let’s define exactly what it is we’re talking about here. You have probably heard the terms debt settlement, debt arbitration, and debt negotiation before, yes? These are all the same thing. Basically, when a debtor (one who owes money) and a creditor (one who is owed money) come to terms where the creditor agrees to let the debtor settle a debt for less than the entire value of the debt, hence the term debt settlement. Profound.

Why would a creditor want to let this happen? Why wouldn’t they just stick to their guns and get the entire amount of the debt? Just wait and get what is owed to them… Well, there are a couple reasons:

  • If the debtor is delinquent enough on their payments there comes a point where the creditor writes off the account as a loss and either takes less than what is owed to them because “something is better than nothing” or
  • If the creditor sells the loan to a collection agency, the collection agency usually buys the debt for pennies on the dollar. Said collection agency will then turn around and go after the original debtor for the entire amount of the original debt but will almost always settle for less. Debt settlement.

Debt settlement can be done on your own, or it can be done through a debt settlement company. Debt settlement companies act as an intermediary between debtor and creditor, negotiate settlements and facilitate all debt settlement that happens. My tale will be from the perspective of debt settlement through a company.

Why Choose Debt Settlement

As I cover in my post, The Value Of Money, at one time I was a train wreck with money. Long before I began Face Your Finances, long before I became this polished fiscal guru before you (yes, sarcasm is intended there, in case you didn’t get it. I wish there was a font “sarcasm”.) I was young and stupid when it came to finances. As a direct result, I racked up some serious debt. Monthly payments grew until I could no longer afford to pay even the minimums on everything. Once this happened, things spiraled out of control pretty quickly. Late fees, monthly minimums, months behind… eventually, I stopped even trying to make payments on some accounts and focused on the accounts that were closest to current. I also played the credit shuffle. Opening new cards or transferring balances. All of this was not a solution. It was barely even a quick fix.

Eventually, I turned to debt settlement. I had heard of it and it seemed like my magic cure-all. I learned you could do this as an individual or be represented by a company for a percentage of the settlement amounts. Since I was young and ignorant, I chose to do the latter. I figured leave it to the professionals, surely they can settle for lower amounts than I could. They do this for a living. I could not afford to pay my debts and my only two options were debt settlement or bankruptcy.

My Experience With Debt Settlement

I found a company (that shall remain nameless here due to ongoing legal proceedings against them…foreshadowing) and called them up. They described their program to me, outlined their terms and exactly what information they needed from me and I agreed, compiled and sent them all the information and we were underway. The first thing they did was cease all communication attempts from creditors to me. This was a pretty nice blessing. My phone was silent for the first time in months. The next step was for me to begin saving up money to close some these accounts. I saved up cash pretty quickly and in just a couple weeks had enough to settle the first account. They were able to negotiate a 45% settlement, which means, for the $3,500 debt, I paid it off for $1,575. I was thrilled! Progress!

This same process repeated for all my debts and in the span of 18 months, I had gone from roughly $40,000 in debt… to zero. I had paid a total of roughly $18,000 to pay off all debts. I was debt free for the first time in years and it was an awesome feeling! For those of you who have achieved paying debt down to nothing, you know what I mean! So freeing and liberating… at the time, it was unlike anything I had ever experienced.


So, almost six years pass and I get off work and go to the grocery store to buy bread. I pay using my check card. It is declined. I pay using cash instead and as I’m walking out of the store, bread in hand, I am checking the balance of my checking and savings account via my phone. I open it up and see that both read: “$0.00”. This can’t be possible, of course, seeing as how just the day prior I had several thousand dollars… Some mistake, some glitch, or worst case scenario, my account was hacked. Minor inconvenience, no big deal.

I get home and eat some of my bread. I like to eat a couple pieces at a time with some other stuff in the middle. This is actually how I consume most of my food. I call it a food sandwich. Anyway, I get home and in my pile of mail from a couple days prior is a large, brown envelope. Suddenly, I have an ominous feeling. When I set it down two days prior to ignore it, I did just that – ignored it. But now it was calling to me. I opened it and inside I found a very professional looking letter from So and So Attorneys At Law stating that a judgement had been filed against me through the state of Minnesota for a debt the law firm owned. Also, they stated that my bank accounts would be garnished. Apparently, they moved quickly on it.

I sat there, dumbfounded. I read the documents again. I stared at them for a while. It was making no sense. I didn’t have any debts. But someone said I did, and someone acted on that, and now I had no money in my bank accounts. How could I validate this? What could I do? I decided I needed to pull my credit report because surely, whatever I supposedly owed any lending institution would show up there.

The next day, I had my full credit report pulled and received copies. Sure enough. On it, I saw that the debt that this law firm claimed to own DID show up, except it had an origination date of about eight years prior. This made NO sense! I keep pretty meticulous records, so I checked my documents and found this debt and documentation of it being closed. I went back to my credit report and flipped the page. What I saw next made my heart sink and my stomach jump. I saw three more debtors listed, all stemming from the same time period – eight years prior. I compared these debts, again, to my records and saw that I had settled all these, as well, through the debt settlement company. I was absolutely and thoroughly confused.

I decided that I had to contact the actual debt settlement company and talk to them. Perhaps they had encountered this before and had an answer for me. Certainly they’d be able to help in some way. I looked them up online and the first thing that came up was about the worst thing that could have happened at that moment. I did a search for ABC Debt Settlement Company and what came up was Sorry, You Got Swindled Debt Company. I found links detailing lawsuits against the company I went through. I found out that they no longer existed and that there was nobody I could talk to about this.

So, what had happened was this:

  1. I funded my account with money to settle these debts.
  2. They actually DID close some of the smaller debts.
  3. I continued to fund my account.
  4. They did NOT close the larger debts.
  5. They falsified documentation stating debts HAD been closed and ran off with my money.

Or, more simply put:

  1. They F**ked me.

Pretty sweet, right!? Looking back, of course I would have done things differently at every juncture. I wouldn’t have overspent in the first place, but that’s a moot point. I would have certainly settled these debts myself because there is nothing that a debt settlement company can do that an individual with a modicum of knowledge cannot do. All it takes is a few minutes of self-education and you can become a power-wielding badass when it comes to many topics! I promise you this! Also, looking back, I would have seen it as a red flag that every telephone correspondence I had with this debt settlement company felt like I was talking directly with the Eastern Bloc. Whatever.

The resolution to this situation will not happen in this post, but I assure you, it will happen in a forthcoming post to be released very soon.


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