Answers from debt settlement expert Jared Strauss
Long-term plans have a low completion rate. A 2020 study commissioned by the debt-settlement industry found that 22% of enrolled consumers settled all of their accounts within 48 months. While those accounts stay unpaid, you remain exposed to lawsuits, often for years. Settling the accounts with the Strauss Method shortens that window. It does not remove the risk, but it can reduce it.
That statistic matters because a person who falls behind rarely has one problem. Ten delinquent accounts are ten separate problems. Each one can be placed with an attorney on its own.
Settling one account does not resolve the others. A program that settles them one at a time, over years, leaves the rest unpaid while the clock runs. The study is what that looks like in practice: most people who enroll into a long-term program do not settle all of the accounts.
We only offer it when you can fund the settlements quickly. Before anyone is enrolled, we look at the accounts, the resources, and whether those resources can resolve the enrolled debts close together. If they cannot, we do not put you in a 24–48 month program. Our Payment Plan service is the bridge until you can.
If you can settle quickly now, we help you negotiate the enrolled accounts at the same time, with the goal of settling them close together, not years apart. Most clients finish in about 6 months. Some finish sooner. Some take longer. You get the offers in writing, you decide which ones to accept, and you pay the creditors directly.
The fee is 20% of what we save you on the settlements you accept. There is no upfront fee, and a rejected offer does not create one. That screen is the point. Long-term programs enroll people who cannot finish, then leave the unpaid accounts exposed while they save. We do not.
Our typical debt settlement client finalizes all of their negotiations in about 6 months. Some finish sooner. Some take longer. It depends on the creditors, the balances, and whether the funds are actually available. Settlements can be structured as a one-time lump sum payment or spread across monthly installments. A 24–48 month program is a different product, and we do not offer it.
When considering a settlement paid in installments, also called a term settlement, it is important to understand that the account usually continues to report as an unpaid collection or charge-off until the settlement is completed. A lump-sum settlement ends that exposure faster. Installments are useful when the funds are not available all at once, but they stunt your credit recovery for longer.
A settlement paid in installments is not finished until the last payment is made. Until then the debt is not satisfied. Missing a payment can void the agreement, and the remaining balance can become due again. This is the biggest risk many people overlook.
Do not enter into an installment settlement until you have a cushion of funds set aside that you can draw from in case you have an interruption in income. The more installment settlements you agree to, the bigger cushion we recommend.
Our debt settlement fee is 20% of what we save you. There is no upfront fee. You pay the fee only after you accept a settlement. Our fee is often less than half the cost of a program that charges 20–25% of what you owe.
Our Payment Plan fee is 5% of the balance and includes 18 months of support. There is also no upfront fee. The fees become due as the work gets done. When the time comes to convert your payment plan into a settlement, we reduce our Debt Settlement fee to 15% of the savings.
Yes. You work with Jared the entire time. This is a specialized service, and your situation is too important to hand off to someone else.
You pay your creditors directly. The only money that comes to us is our success-based fee after settlements or payment plans are reached.
We primarily specialize in settling credit cards, installment loans, lines of credit, small business loans, personal loans, business credit cards, and other similar unsecured debts.
If the accounts are already delinquent, the damage is already on the report. Settling does not repair that history. It resolves the balances so you can start rebuilding. If your credit is still in good standing, do not settle or make payment plans just to lower the balances or monthly payments if you can solve the problem without damaging your credit. Good credit is an asset and should be protected if possible.
When you settle a debt for less than the full balance, your creditor may issue a 1099-C for the forgiven amount. This forgiven debt is generally considered taxable income unless you qualify for the insolvency exclusion.
Insolvency is a net-worth test. You add up the fair market value of your assets, add up your liabilities, and subtract. If your debts are greater than your assets, you may be able to exclude some or all of the forgiven amount. That exclusion is claimed on IRS Form 982. For additional reference, see IRS Publication 4681.
Settling accounts one by one can shrink the insolvency exclusion and make the resolution much more expensive. Each forgiven account lowers your liabilities before the next one is settled. Settling them close together is more likely to preserve the negative net worth, so more of the forgiven amount can be excluded. This timing is often overlooked. Most settlement companies talk about the 1099-C. Few talk about how settling one account at a time can use up the exclusion before the later accounts are forgiven, causing you to owe taxes you otherwise would not have owed. Our job is to resolve the debts for the least cost we can, and to flag that exposure before you hire us.
For this reason, we assess your potential tax exposure during the consultation. We’ll review your potential tax liability in a cursory way and ask you to speak with a tax professional before deciding to hire us. The last thing we want you to do is blindly transfer your debt problem to the IRS.
And lastly, if you are still current on your accounts and do not qualify for the insolvency exclusion, settling may not make sense once you do the math. In those situations, a credit counseling approach can make more sense.
If you need time to recover financially but want to avoid bankruptcy, we offer a Payment Plan service as a safer alternative to long-term debt settlement. With this service, we help you negotiate the smallest payment the collector will accept on the charged-off accounts, so more of your money can go into savings and you can settle as soon as possible.
Once an account charges off, interest and fees generally stop. Your monthly payments go directly toward the principal balance. Having a payment plan in place can reduce the chance the accounts are placed with an attorney while you rebuild. It does not satisfy the debt until you settle it.
This service is for charged-off accounts and includes 18 months of support. We do not recommend the Payment Plan service unless you expect to be able to settle the accounts together within those 18 months.
This option is especially helpful if you're looking for an alternative to Chapter 13 bankruptcy or if you don’t qualify for credit counseling but aren’t yet able to settle your accounts quickly. Settlements can be structured as a one-time lump sum payment or spread across monthly installments. The goal is to give you breathing room to rebuild while staying in control, with the flexibility to settle the accounts together later when you’re in a stronger financial position to do so.
Read our free 4-part educational series, or have Jared look over your accounts with you.