What’s it Like to Go Through Debt Relief?

Being overwhelmed by debt feels miserable. There are no easy answers for breaking out of that rut. However, if you’re ready to make a commitment to your financial future, enrolling in a debt relief program can be very rewarding.

In addition to the logistics of debt relief, you should be prepared for an emotional journey. It takes focus and patience to get through conquering your debt. When you reach the other side, though, you might feel as if the weight of the world has been lifted from your shoulders. 

As with any long journey, breaking it up into shorter legs can make it more manageable. You can get a sense of what to expect and how you’re likely to feel each step of the way. This could give you the reassurance of knowing you’re on the right track. 

Debt Relief Stage 1: Get Organized

Part of the stress that comes with too much debt is feeling that things are out of control. Solving the problem starts with getting organized. 

What to expect

You’ll need to spend some time combing through the details. Gather details on each of your debt accounts: balances, account numbers, repayment terms, contact information, and so on.

At this stage, you’ll also want to identify which debts are good candidates for debt relief. Secured debt isn't well suited for negotiating with creditors. A secured debt is guaranteed by collateral (something valuable that the lender could take if you don’t repay the loan. For example, if you can’t repay your car loan, your lender could repossess the car.

Your unsecured debts (such as medical bills or credit card balances) are better possibilities for this process.

The other item on your checklist is finding a good debt relief firm, one that’s reputable and experienced. You’ll work with them to create a plan that you believe in.

How you might feel

This is the most hands-on stage for you. You might find this detail work a little boring. Many people find it empowering to get organized and make a plan. For the first time since your debt problems began, you might feel you're on the path toward solving your problem.

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Debt Relief Stage 2: Wait and Save

Debt relief doesn’t happen overnight. Once you get everything organized, you can start negotiating with creditors. Most people can’t afford to save money for making offers and also keep up to date on all of their monthly payments. Also, creditors aren’t typically interested in negotiating if you’re current on your bills. Why would they? If you can afford to keep up, they assume that you can continue to make your payments. 

That’s why most people who want debt relief stop making payments on the debts they want to negotiate. 

It may take a while before creditors are willing to consider a settlement offer and even longer for them to approve one.

What to expect

The toughest part of this waiting game is that you’ll probably continue to be harassed for payments while you work on your debt settlement strategy. Any time you miss a payment, your credit standing will likely suffer. And creditors may pursue you for the debts.

At the same time, if you clearly can’t afford to fully repay your debts, your creditors may eventually become willing to negotiate. They may realize that accepting a lesser amount might be their best chance of getting any payment.

During this stage, take the money you would have made toward payments and set it aside in an account that’s just for debt settlement offers. If you work with a debt settlement company, they’ll set up this account for you, and they’ll use this money later to settle debts.  An available lump sum may well improve your bargaining position. 

How you might feel

Emotionally, this could be the lowest point of the process. Nobody likes to be harassed for payments. It’s tough to stay disciplined while you’re waiting for the process to begin showing results. The good news about low points is that when you reach them, there’s nowhere to go but up.

At this stage, working with a debt relief professional can be really helpful. It gives you someone to lean on during the tough times. A professional who has been through the process can give you the perspective to see that everything you're going through has a goal. Instead of just spinning your wheels, you’re now working on a solution. 

Debt Relief Stage 3: Knock Down Debts

Assuming you have multiple creditors, the third stage of the process could be a mixed bag. The waiting game will continue, but the first signs of success should start to peek out.

What to expect

Not all of your creditors are likely to agree to settlement offers at the same time. Expect some negotiations to reach a conclusion, while others drag on. 

During this stage, you may have to consider counteroffers from creditors. They may agree to cut your debt, but not by as much as you’d originally hoped. You’ll need to reassess your financial situation to decide which counteroffers to accept. Then you’ll have to figure out how that affects your ability to settle with other creditors. 

How you might feel

When the first creditor accepts a settlement offer, for the first time in years you could start to feel some relief about your debt situation. Now you’re seeing the process start to work. Suddenly, the amount you owe will be heading in the right direction (down). 

Debt Relief Stage 4: Back on Track

Every time you settle one of your debts, you’ll be one step closer to your goal. The hardest part—getting started—is over. 

What to expect

Each time a creditor accepts a settlement offer, the debt settlement company will present it to you for approval. Your creditor might accept a lump sum for less than you owe, or a series of payments. Once you approve the agreement and at least one payment is made, the debt settlement company will take its fee from your dedicated account.

Settling debts won’t immediately repair your credit. However, it'll help you move forward to a better financial future. That will allow you to start building a positive payment history. In time, as you put your missed payments behind you and keep your credit card debt low, it’s possible to start rebuilding your credit score. 

How you might feel

Elated. Hopeful. Resolving any problem can bring relief. People who enter debt settlement have often been dealing with debt problems (and the stress that goes with them) for years. The relief of resolving those problems can feel life-changing. 

You should give yourself a big pat on the back. You had a problem, and even though it wasn’t easy, you took care of it. That’s a huge accomplishment.

Debt Relief Myths vs. Facts

You can find a lot of great info on the internet, but you can also find a lot of nonsense. Trying to separate the debt relief facts from the myths can be tricky. Here are some common debt relief myths—and the facts behind them.

Myth 1: Debt relief will ruin your credit score forever

Fact: While debt relief may have negative impacts on your credit score now, those impacts are definitely not forever. Many people notice their credit scores improve after completing a debt relief program because they stop accumulating more debt and can afford to pay their bills on time. 

Myth 2: You can't get new credit after debt relief

Fact: Your options for new credit may be limited after debt relief, but they don't disappear entirely. Secured credit cards are particularly useful tools for rebuilding credit scores after completing a debt relief program. As you rebuild, your options for new credit could improve.

Myth 3: Debt relief can make all of your debt disappear

Fact: Most debt relief programs will only work for unsecured debts, like credit cards, medical bills, and many personal loans. It won't work for secured debts, like mortgages or auto loans—these loans have collateral that the lender can repossess or foreclose on and sell to get paid.

Debt relief can get rid of your debt for less than you owe, but it doesn't make debt go away like magic. You'll still need to repay some portion of your debt, depending on what's negotiated with your creditors.

Myth 4: Debt relief is a quick fix

Fact: Debt relief isn't an instant solution. It takes time to save money, negotiate with your creditors, and settle your debts. The process may take several months or even years if you have multiple debts to settle. There’s no quick and easy way to get rid of crushing debt. 

Myth 5: Using debt relief means you failed

Fact: Seeking debt relief isn't a sign of failure. It's a sign that you're using all of your resources to improve your financial situation. Debt relief is a financial tool, and it's smart to use all of the tools at your disposal to deal with the challenges you face. The only failure is giving up.