The Top Debt Settlement Strategies in 2021

The Top Debt Settlement Strategies in 2021

Debt settlement is an agreement to pay off a portion of the total amount you owe, in exchange for effectively canceling your debts.  This can be a difficult process and is generally recommended only as a last resort for debtors who are unable to pay off their debts any other way.

Determining whether you have any other options available is often a key part to working out your debt settlement plans.

In order to reach a debt settlement, you must obtain an agreement from your creditors. This is either your credit card company, bank or another lender. The plan depends entirely on receiving their approval, so it is important to have a strategy in place when making your plans. You must know the details of your financial situation, plan your approach and be aware of what you are offering. It is also important to be ready to negotiate the terms of the settlement.


A creditor is unlikely to agree to a debt settlement plan unless the debt is already delinquent, usually by at least 90 days. If you know you are not able to pay your debts and are considering a settlement, you may need to wait until your debts are considered delinquent before taking this route.

A creditor sees delinquency as evidence you are unlikely to pay the debt and may be more likely to agree to a settlement as a result. For creditors, it is better to agree to a plan where they are guaranteed some money as opposed to dragging out a plan where you are unable to pay, resulting in your creditors getting nothing.

Sometimes, a longer period of delinquency results in a lower payment. However, this is not always the case, and you must not plan to leave your debt too long, as this continues to damage your credit score.

Professional or Personal

There are many debt settlement companies offering services to adults in debt. If you know you are not able to make the arrangements for debt settlement yourself, consider obtaining the services of such a company. However, these companies may not be the best choice, as the company cannot guarantee success.

Related Article: Debt Management Plans

With a debt settlement company, you are required to pay fees and interest despite this lack of assurance, and the money may eventually be wasted. You are also required to wait while the company collects your payments, after which they offer a settlement. While this continues, you are not able to make any payments and may receive letters and calls from creditors.

Generally, the best strategy is to manage your debt settlement on your own. The process may be time-consuming, but you do not spend additional money while trying to rid yourself of your debt.


Although signing up with a debt settlement company can be risky, it is sometimes advisable to seek professional help before attempting the process yourself. Keep in mind when you receive financial advice through a financial planner, everyone’s finances are different and must be judged independently.

If you are unclear as to the state of your finances, it is difficult to determine whether the settlement is the right choice for you. To help with this, a settlement company provides an evaluation service. Additionally, you may be able to hire a different financial professional to help you with your debt settlement, such as a personal accountant.


Bankruptcy is viewed as a drastic step to take, but it is often preferable to debt settlement in relation to dealing with debt. Before taking the settlement route, you are recommended to consider bankruptcy first. If you decide settlement is a better option for you, you can continue with your plans.

Being aware of the possibility of bankruptcy is important when dealing with your creditors. If you were to file for bankruptcy, particularly Chapter 7 bankruptcy, your creditors may receive no payment at all. Remember this when you are negotiating your settlement.


Creditors want to gain something from the arrangement they make with you. Since they are not paid back the full amount they are owed, a good strategy is to offer a brief repayment term. If possible, consider one lump sum as the payment. Otherwise, come up with a payment plan where you offer as few payments as possible to settle your debt.

Make sure you have considered the amount you are able to pay. This amount must be readily available in cash and cannot depend on any external factors. If it is available, you can offer the full amount up front, with the hope your creditor agrees in order to get their payment as soon as possible, even if it is not the full amount.

If you are using a debt settlement company, you are asked to make payments to the company over a longer period. It is important to make sure the company is properly insured before making any payments. You must ensure you are able to view the account balance and keep track of how much you have left as part of your repayment plan.


Negotiating with your creditors is key to arranging a settlement plan. Preparing in advance, and being fully informed of your financial situation, is important throughout the negotiations. If you feel you are prepared, you are ready to contact your creditor directly. Remember the following tips:

  • Have the details of your finances in front of you when negotiating. This includes numbers such as your current debt and the cash you have on hand for a settlement.
  • Go higher up the chain of authority if you need to. Generally, initial contact is made over the phone, and you speak to a customer assistant. You may need to make a special request to speak with someone who has the authority to arrange a settlement.
  • Make a note of whom you spoke to, the time you called, and what was said, for each phone call.
  • Offer a lower amount for the payment to start with, so you can negotiate up to your final offer.
  • Determine how the settlement affects your credit score.
  • Make sure the agreement is written out and signed by both parties.

Related Article: Debt Consolidation

By Admin