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The Best Debt Settlement Companies

The best debt settlement companies offer a way to eliminate your unsecured debt for a fraction of the balances owed. As a result, monthly payments can get slashed, and clients become debt-free in three to four years. Wow, is this truly possible? 

Don’t get too excited yet, because if something seems too good to be true, it often is. As Elizabeth O’Brien stated on, “You need to be very careful about the debt settlement companies and service providers you seek help from; the cure may end up being worse than the illness.”

Debt settlement programs should not be your first choice due to the significant risks and negative consequences that come with this type of program, as we’re about to explain. And you do have a less expensive debt relief alternative to consider first that can also result in removing debt and its associated negative marks from your credit reports.

Debt settlement services may sound very attractive when it’s being sold to you from an unreputable company that avoids disclosing the downsides and potential risks. However, debt settlement can be extremely valuable to consumers who can’t afford to pay their bills “in full.” 

ValuePenguin explains, “If you have a large amount of outstanding debt without the ability to repay, your creditor may consider forgiving a portion of your debt in exchange for a lump-sum payment.” This process is called debt settlement.

So, without further ado, we’re going to dive into the nitty-gritty details that you need to know. We’ll give you the answers that you need to know about to determine; A.) the best debt settlement companies and B.) whether or not you should use debt negotiation to pay off your bills.

Downsides and Risks that the best debt settlement companies will disclose and know how to deal with:

  • Credit Can Get Negatively Affected: With debt settlement programs, creditors don’t get paid every month, late marks and collection accounts get reported to credit bureaus. After your collection accounts get reduced and settled, late marks and collection accounts remain on credit reports, hurting credit scores for up to seven years. According to Lisa Bernardi on, “Debt settlements go on your credit report and stay there for seven years, which can lower your credit score by more than 100 points.” Credit scores may not even improve after your collection accounts get paid in full, but the longer they sit on your credit report, the less negative effect they will have on credit scores. After a collection account gets removed from a person’s credit report, credit scores improve within 60-90 days. 
  • Debt negotiation programs can cost up to 25% of the total debt enrolled into the program on top of the settlement (i.e., the amount getting paid to your creditor). In the end, a consumer can end up paying around 75% of their total debt, including fees. 
  • Creditors are not obligated to settle, and therefore, these types of credit card negotiation programs are not guaranteed to work. No debt settlement company can tell you exactly how much you’ll save on the plan until negotiations get finalized and settlements are in writing. Consequently, settlements vary on a case-to-case basis, and debt settlement companies can only provide an estimate of how much money you’ll save. 
  • Some creditors may issue a summons over a debt, resulting in the consumer paying close to the total amount back on the debt. If a lawsuit gets ignored, the consumer can end up getting a default judgment against them, potentially having wages garnished. The best debt negotiation companies will provide a detailed plan for handling and resolving a summons. The best way to handle a summons is to have a lawyer review it and then respond accordingly. Lawyers may find errors or illegal activity associated with a summons, resulting in the dismissal of the debt. 
  • Since creditors don’t get paid monthly, late fees and interest accrue, resulting in balances increasing over the first year. If a client cannot afford to continue making monthly payments and cancels the program, they could end up with more debt. 
  • High costs. Debt settlement programs set clients up with a “special savings account.” Every month the program payments are deposited into this account. It can take months or even years before a debt is negotiated and settled. Consequently, if the consumer can’t afford to continue making monthly payments and drops out of the program, they could end up with more debt. Make sure that you can truly afford a debt settlement program before joining so that you can stick with it until the end. 
  • Biased and misleading sales practices: The top settlement companies will conduct a budget analysis before signing a client up for a debt resolution program to ensure they can afford the payment plan they are enrolling in. After completing a budget analysis, the consumer should be presented with all of their options, not just one program, because it’s all the company offers. Some debt settlement sales reps will ignore the client’s best interest because their only goal is to make a commission. Choose a debt settlement company that offers multiple debt resolution options, allowing you to choose the plan that best fits your needs and goals. 
  • Creditor harassment can occur. No debt settlement company can guarantee that creditor harassment will stop. Having said that, if you use a lawyer to settle your debt or enroll in a debt settlement program with a law firm, legally, all creditor calls must get directed to your attorney. A debt settlement lawyer can then use any creditor calls as leverage and even sue a debt collection company for violating federal laws. Law firms offer the most effective and best debt settlement program. 
  • Tax consequences can occur after settling a debt. The amount that gets forgiven (i.e., your savings) is considered taxable income. You could owe taxes on that savings, just like ordinary income, unless your accountant files the IRS form #982 illustrating your insolvent.

Because of the risks, debt settlement is typically considered a last resort. Yet, you must work with a reputable company if it’s your only option. So what option should you consider before using a debt settlement program?

A debt resolution or debt validation program

Golden Financial Services offers an integrated approach to resolving debt that a consumer can’t afford to pay, including debt validation, settlement, and credit restoration, all inside a single Debt Resolution program. After close to two decades of assisting consumers with getting out of debt, we conclude that this Debt Resolution program is by far the best, as it addresses both a person’s debt and credit issues. 

This Debt Resolution program uses federal laws to challenge the validity of consumer debt (i.e., debt validation). In more than half the cases, creditors can’t prove a debt is valid, resulting in the debt legally not having to get paid and coming off the consumer’s credit report. However, if a collection agency demonstrates that the debt is valid by verifying that they are legally authorized to collect, we will settle a debt.

Debt Validation Case Example

Debt collection agencies are sued for millions of dollars every year for illegal, unfair, and deceptive debt collection practices. For example, check out the recent lawsuit against one of the most prominent debt collectors in the world, Midland Funding.

Midland Funding (also known as Midland Credit Management “MCM”) – a collection agency that collects on Bank of America and Citibank credit card debt – must refund approximately $60 million to consumers and immediately stop all collection activity on $128 million in existing debts. 

Imagine if you settled your Midland collection debt and are now stuck with the debt and collection mark on your credit report for up to seven years. If you only first used debt validation, you could have walked away without paying the debt and having it removed entirely from all credit reports. Debt validation can be your best strategy to get out of high credit card debt.

If you have credit cards and unsecured debt that you can’t afford to pay, call Golden Financial Services today. You can learn your options for free and enroll in the program of your choice at (866) 376-9846. You may also contact Concepcion Gutierrez, the author of this post and an experienced credit counselor who has been certified for credit counseling, at (858) 205-6122.

Example of How a Debt Validation Program Works

A debt validation program makes full use of up to fourteen federal laws. These laws require credit card companies and third-party debt collectors to maintain certain legally required documents, accurate information, and complete accounting records. 

A few examples of these laws include:

  1. Fair Debt Collection Practices Act (protects from illegal debt collection)
  2. Fair Credit Reporting Act (protects credit from inaccurate and invalid credit information)
  3. Credit Card Act (protects consumers from credit card companies operating in unfair and unjustly ways)
  4. Fair Credit Billing Act (protects consumers from inaccurate billing, including charging unauthorized fees)

An example of how debt validation works: 

The original creditor (i.e., the credit card company) can’t provide the collection agency with certain documents due to privacy laws. So when a debt validation program disputes the debt asking for these privacy-protected documents and the collection agency can’t produce the documents, the result is that the debt becomes legally uncollectible. 

What happens if a debt is proven to be valid?

Debt settlement will be used as a backup strategy if a collection agency can validate and verify that they are legally authorized to collect on a debt. The program offered through Golden Financial Services uses this integrated approach of debt validation and settlement to help clients deal with unsecured debt most efficiently while simultaneously saving clients the maximum.

Additional Resources: 

  1. You may be able to walk away from paying a debt legally 
  2. Learn more about a debt validation program 

Call for a free consultation from Golden Financial Services at (866) 376-9846. Also, speak to Concepcion Gutierrez, the author of this post and an experienced credit counselor at Golden Financial Services, at (858) 205-6122.

What do the Best Debt Negotiation Companies have in common?

According to personal finance editor Mitch Strohm, in an article at, “The best debt settlement companies are transparent about fees, have a long history of excellent customer service and are accredited by an industry watchdog, like the American Fair Credit Council (AFCC).”

Golden Financial Services is A+ rated by the Better Business Bureau and ranked #1 debt relief company in the nation.

BBB Accredited Debt Settlement Companies

 Most companies can purchase BBB accreditation for a fee, so when looking for a company to work with, don’t just rely on BBB accreditation. Also, debt settlement companies are not always allowed to get accredited based on the state they operate. 

But when it comes to a company’s letter rating, from A-F, this factor is based on time in business, the number of complaints a company has, the ratio of positive to negative client reviews, licensing and compliance, and other factors relating to how reputable a company truly is. 

So if you’re searching for the best debt settlement company, according to Paul Paquin, the CEO at Golden Financial Services, “Look for an A+ BBB rated company, not just a BBB accredited debt settlement company. I’ve seen many BBB accredited settlement companies with hundreds of complaints but somehow have remained accredited.”

How to Choose a Debt Settlement Company

Before you decide on a debt settlement service as the answer to your need for debt relief, review your options. There may be several less risky alternatives, such as debt validation, consolidation loans, and consumer credit counseling (also known as debt management plans “DMP”). 

With both debt consolidation and debt management plans, you repay the total principal owed. If you can’t afford to pay your balances in full, consider using a financial hardship plan, including debt settlement and validation. 

If you choose to go the debt settlement route, first vet any company you’re considering. Check that the company has the necessary licenses to operate in your state, and make sure watchdog institutions like the AFCC or IAPDA accredit it. For example, in Texas, debt settlement companies must obtain a debt management license to offer all debt relief services. Golden Financial Services is a top-rated and licensed debt settlement company in Texas, as illustrated here.

Here’s what to look for when choosing a debt settlement company:

  • Accreditation or A+BBB Rated. Look for the company to be an accredited member of the American Fair Credit Council (AFCC) or International Association of Professional Debt Arbitrators (IAPDA) – or a BBB A+ rated the company as described above. 
  • Fees. Be wary of any company that charges an upfront fee. The TSA law prohibits debt settlement companies from charging up-front fees. Debt settlement companies can only charge a fee after a debt is settled and paid, ensuring clients get results or don’t pay a dime.
  • Time in business. Golden Financial Services recommends only working with a company that has at least a five-year track record.
  • Digital experience. Work with a company that offers a consumer-friendly website with free financial education and online access, offering real-time program updates. makes it easy to navigate their website, search for all types of financial education, and provides free financial tools for consumers who want to get out of debt on their own without a program. 

Frequently Asked Questions (FAQs)

How does debt settlement work?

Debt settlement programs negotiate with creditors on your behalf to reduce the balances on each account owed. As a result, a portion of the debt ends up getting forgiven and does not have to get paid. However, clients have to fall behind on monthly payments, so accounts get charged off and sold to collection agencies, which at that point they get settled for much less than the total owed. 

Debt settlement companies will estimate how much they can save a person based on past results. For example, if average settlements are for 50% of the balance, the debt settlement company could quote that on $10,000 in debt, you’d end up paying back around $5,000. With the debt settlement program fees included, your total program cost could come out to around $7,000. The debt settlement company would then figure out an affordable payment plan for you by dividing that $7,000 over 24-48 months. So, for example, your monthly payment, including all costs, could be $294 over 24 months. 

As your payments accumulate in your special purpose savings account, one by one, each creditor gets reduced through negotiations, settled, and paid. If you only have one credit card debt, negotiations may not start until 12-18 months when sufficient savings have accumulated. With debt validation, disputes begin on all accounts immediately after accounts end up in third-party collection status. Since debt validation programs dispute debt right after they end up in third-party collection status, clients see faster results with debt validation over settlement programs. In addition, debts can all get invalidated within the first year of a validation program. Invalidated means; legally uncollectible where a debt no longer needs to get paid – and can’t legally remain on credit reports. 

What must a debt settlement company disclose?

By law and according to the FTC website, debt negotiation companies must disclose:

  • How much the program will cost, including all fees and terms 
  • How long it will take for clients to get results, and these claims cannot be exaggerated
  • The negative effect that debt relief services can have on credit scores and education about how to rebuild creditworthiness 
  • Specific details regarding the “special purpose savings” account, including the fact that all monthly payments will accumulate in this account that the consumer owns 
  • Creditors can sue over an unpaid debt. The best settlement companies will respond to a summons helping a client resolve the debt before the court date. Still, even if a summons is settled, it is usually more expensive than a regular third-party collection debt settlement. Debt settlements on a summons can be 70% or more, not counting settlement fees. Reputable debt settlement companies may offer to settle a summons for a discounted price because the settlements will be higher than initially quoted for a particular debt. 
  • There is no guarantee that creditors will settle and program results will vary 
  • All fundamental aspects of a debt relief service must be explained, including the approximate time frame that each settlement will occur based on past client results and, again, not exaggerated. For example, debt settlement companies can’t use their best settlements as the average. Instead, an actual average must be used in all debt settlement advertising and when providing disclosures.

Debt Consolidation Loans as a Debt Settlement Alternative 

Debt consolidation loans for anyone with fair to excellent credit can help a person pay off high-interest accounts and only have to pay back a single low-interest loan. In addition, debt consolidation can help improve credit scores. 

You can use a home equity line of credit, balance transfer card, or an unsecured personal loan from a bank to consolidate debt. Golden Financial Services recommends using a local credit union for debt consolidation if your credit score is above 700. The benefit of debt consolidation is that you can use the loan to pay off both secured and unsecured debt while simultaneously improving credit scores.

Additional Resources: 

 Check out the Top 10 Debt Consolidation Companies for 2020.

Understand the pros and cons of credit card relief programs.

Consumer Credit Counseling as an Alternative to Debt Settlement


Consumer credit counseling programs (also known as debt management plans “DMP”) are another option for you to consider if you have high-interest credit cards. 

Consumer credit counselors negotiate with your creditors to reduce the interest rates on each of your credit cards. In addition, consumer credit counseling agencies have pre-arranged agreements with banks and credit card companies to lower interest rates. 

On the flip side, some creditors and banks won’t agree to a consumer credit counseling plan. Instead, creditors would prefer the consumer to fall behind on payments allowing them to write off the debt, and the creditor gets paid faster. Yes, I know, hard to believe, right! 

You then make one monthly payment to the consumer credit counseling company, and they will disperse the funds to each of your creditors but at a reduced interest rate. Thus, using consumer credit counseling, you can pay off credit card bills faster, but you will pay all of it back and interest. In addition, you don’t have to fall behind on monthly payments with consumer credit counseling. Instead, your payments remain current. 

Before signing up for consumer credit counseling, a certified credit counselor will review your budget, debts, and overall finances to ensure you are a good fit for this type of debt reduction plan. In many cases, the payments end up being too high for the consumer to afford, and the credit counselor will refer them to a bankruptcy attorney or debt settlement company. 

When to file bankruptcy 

Bankruptcy should be your last debt relief option because of the devastating long-term effects it has on credit. There are two types of bankruptcy that most consumers use. Chapter 7 bankruptcy can wipe away (discharge) your debt, including credit card lawsuits. Not all debts will get discharged, though, including federal student loans. Chapter 13 bankruptcy is more like debt settlement, where you end up paying back about half of your debt but over a five-year plan.

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