FAQs

Settlement Payment Questions

Can I pay off my settlement early?

Yes, you can always make additional payments on your settlement or pay your settlement off early without penalties. 

What is the difference between debt settlement and debt forgiveness?

Debt settlement is a form of partial debt forgiveness. When you settle a debt, your creditor is technically agreeing to FORGIVE a portion of your debt in exchange for you paying a certain amount within a certain time frame. For example, let’s say you owe $5,000 to your creditor and they agree to settle the debt for $2,000 in a single payment due by the 30th day of the current month. As long as you pay them $2,000 by that date, your creditor will forgive the remaining $3,000 of your debt. You will eventually receive a 1099-C “Cancellation of Debt” tax form from your creditor documenting this debt forgiveness, which you will need to file with your tax return.

When does the remainder of my balance get forgiven?

When a creditor agrees to settle a debt, they are agreeing to accept a percentage of the original balance, in exchange for which they will forgive the remainder of the debt. The creditor will forgive the remaining balance of your debt when the settlement is paid within the time frame provided in the settlement letter. If you are making monthly payments on a settlement, your remaining balance will not be forgiven until you make your final settlement payment.

I received a settlement offer from my creditor, but when I log into my online account with my creditor to schedule a payment it still says I owe the full original balance. What’s going on? Is it safe for me to make a payment?

As long as you have a settlement letter from your creditor, it is safe to make a payment no matter what it says in your online account. The letter will supersede any other agreements you have with the creditor. Unfortunately, most creditors and collectors do NOT update your online account balance to reflect active settlements. This is why Resolve always waits until we receive a satisfactory settlement letter from your creditor before presenting you with a final offer — the settlement letter is your main legal proof of the settlement arrangement. As long as you make your settlement payments in the correct amount and by the due date on the settlement letter, the creditor is legally obligated to keep their end of the bargain, regardless of what it says in your online account with the creditor.

What is a settlement letter?

A settlement letter is a written offer from a creditor to settle a debt, and serves as legal documentation of this arrangement. A settlement letter is a legally binding agreement on both you and the creditor, and technically replaces your original contract with them. As long as you follow the payment instructions in the letter within the provided time frame, your creditor is legally obligated to honor the terms of the settlement (i.e., forgive the remaining balance of the debt).

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