{"id":286938,"date":"2016-04-04T10:41:53","date_gmt":"2016-04-04T15:41:53","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/bankruptcy\/debt-relief\/debt-negotiation-programs.html"},"modified":"2024-05-22T09:09:48","modified_gmt":"2024-05-22T14:09:48","slug":"debt-negotiation-programs","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/bankruptcy\/debt-relief\/debt-negotiation-programs.html","title":{"rendered":"Debt Negotiation Programs"},"content":{"rendered":"\n
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Debt Negotiation Programs<\/h1>\n
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\n By Amy Vandervort-Clark, J.D.<\/a> | Legally reviewed by Susan Mills Richmond, Esq.<\/a>\n | Last updated\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

Being in debt is stressful, especially if you struggle to make payments. Late payments can wreck your credit score. Debt collectors can be aggressive, adding to your anxiety and worries. You are not alone. There are debt relief options.<\/p>\r\n

Besides nonprofit credit counseling, debt consolidation loans and debt management programs are options. Bankruptcy is also a choice but is usually a last resort.<\/p>\r\n

One option for debt relief is a debt negotiation program (DNP).<\/p>\r\n

What Is a Debt Negotiation Program?<\/h2>\r\n

Debt negotiation programs work with your credit card companies and other creditors to accept less money to settle your debts. These programs are sometimes called "debt settlement companies" or "debt settlement programs." Debt Negotiation Companies are often set up as nonprofits, though some state laws have tightened requirements for debt service companies.<\/p>\r\n

A debt arbitrator for the DNP will negotiate a debt settlement plan. If you cannot pay a lump sum, the DNP may ask you to make monthly payments into an escrow account. The DNP may also have you stop all communication with creditors as you build up a savings account in escrow. Once the account has enough funds for debt payments, the DNP will negotiate a lump sum settlement offer with creditors and lenders.<\/p>\r\n

But, your debt will increase during this time with interest accrual and late fees. Your creditor may sell your account to debt collectors or write off your debt, which wrecks your credit score. Plus, your creditors do not have to work with DNPs.<\/p>\r\n

These programs are not the same as credit counseling agencies<\/a>, debt consolidation programs, debt relief<\/a> companies, or debt management plans (DMPs)<\/a>.<\/p>\r\n

Some DNPs offer legitimate, accredited debt relief services and are valuable for certain types of debts, such as credit card debt or overdue medical bills. But many of them can be risky and harm your credit rating.<\/p>\r\n

Finding Accredited Debt Settlement Services or DNP<\/h2>\r\n

Finding a trustworthy debt relief program takes a little research. There are ways to ensure you choose an accredited program.<\/p>\r\n

The American Association for Debt Resolution, formerly known as the American Fair Credit Council, is an agency that regulates the debt relief industry. You can search its database<\/a> for accredited members.<\/p>\r\n

You can also search the Better Business Bureau website<\/a> for complaints and the company’s rating.<\/p>\r\n

Also, your local bank or credit union may have a list of reputable debt relief companies and credit counselors.<\/p>\r\n

Under most circumstances, bankruptcy<\/a> does not dismiss student loans, personal loans, alimony, or child support debt<\/a>. DNPs do not dismiss these debts either, but they can try to negotiate settlements of them. Also, DNP companies can’t stop collection calls or give your financial situation a fresh start. Only filing for bankruptcy can do these things.<\/p>\r\n

Common Claims and Risks<\/h2>\r\n

Some DNPs may claim to cut your total debt in half, but this may not be realistic for your financial situation. Upfront fees can be steep for a DNP, often topped with a final bill based on a percentage of supposedly saved debt.<\/p>\r\n

A debt negotiation company may also claim its services will not negatively affect your credit score or ability to get future credit and lower interest rates. But, all too often, debt negotiation programs leave their customers with more debt, dealing with debt collection companies and the damaging effects of a poor credit score.<\/p>\r\n

The debt settlement process takes time. Most creditors don’t settle debts until they are several months overdue. This means many of the settlements come with strings attached:<\/p>\r\n