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Debt Settlement: Months 1 - 6

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Debt Settlement As I discussed in a previous blog, Debt Settlement may be the right choice for people who cannot afford a traditional DMP, do not qualify for bankruptcy, or simply do not want to file for bankruptcy. Debt Settlement is an attempt to negotiate with creditors to accept a lesser amount than what is truly owed based on a customer's budget and payment. 

As with any financial decision, it is important to explore the benefits and challenges before enrolling in Debt Settlement. It is not easy, nor is it a quick fix. It can take years to complete, and creditors will likely escalate their collection activities. The benefit is the ability to pay off your debt for a lesser amount, and save thousands of dollars in interest and finance charges. This blog will help prepare new customers for the first six months enrollment on a Debt Settlement Plan. 

Creditors are Notified of your Enrollment

We send a communication to the creditors notifying them our customer has decided to enroll in Debt Settlement. This communication provides the creditors the account information and a phone number to our negotiations department to facilitate open communication regarding payment options. Unlike a DMP this does not mean your creditors will stop contacting you. On the contrary, major creditors, like Bank of America and Capital One, will usually contact our customer regarding their the account. It is important to understand this from the beginning; phone calls will not stop, they will increase.  

Plan Payments and Payments to Creditors

Making your first payment as quickly as possible is the best way to start your plan. When a payment is made, fees are taken, and the remainder is placed in your escrow account. The more quickly the balance grows in the escrow account, the sooner we can work with your creditors to accomplish settlements.  

Unlike a Debt Management Plan your payment will not be sent to your creditors. A creditor only receives a payment when they have agreed to a settlement, which can take months or even years. On average our customers experience their first settlement after 6 - 12 months of consistent payments. This will also depend on the account balances, the creditors, and the customer's individual situation. 

Accounts Become Delinquent 

In order for a creditor to entertain accepting a settlement the account must become delinquent. If a creditor is receiving full payments every month, what motivation does the creditor have to accept a lesser amount? When the accounts become delinquent, the customer's credit is damaged, and the creditors will increase collection activities, such as collection calls and notices in the mail. This is a very normal part of settlement process and should be understood thoroughly before enrollment. 

Handling Collection Calls 

This can be a very difficult part of Debt Settlement, especially for customers who have never been delinquent on their accounts before. Creditors call, and they may tell you a variety of things in order to intimidate or scare you into making  payments directly to them. It is important that you do not do this! It takes both time and patience to be successful on Debt Settlement.  

Follow the tips below when answering a collection call:

  • Be courteous and polite
  • Explain that you have joined a debt settlement plan and are working through a difficult financial time
  • Give the creditor the phone number for your debt settlement agency
  • Gather the account information and contact number from the creditor
  • Write down this information in a notebook 

If you receive a call from a collection agency because they are now handling your account, please gather the information and communicate this to your Debt Settlement agency. 


Within the first six months it is unlikely the negotiations on your accounts will begin. The creditors have been notified of your enrollment in Debt Settlement and have our negotiator's phone number. This can be difficult for some of our customers. As we have pointed out before, it takes both time and patience to be successful! It is important to remember the more quickly the balance in your escrow account increases, the more quickly settlements can be achieved.  

Rob TaylorRob Taylor  

Rob Taylor is a contributing author for A Straight Talk on Debt. Rob tells it like it is when it comes to the latest debt industry news and shares his advice on personal finance.

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  • The Bank Manager at Happy State Bank Teckla branch called me and is very unhappy ,can't understand why I'm doing this ,I politely told her I had to ,she said your minanum payment to your credit card is less than a $100.

    said you been a customer here for 15 years ,I just can't understand why your doing this,I told her I had no money left by the time I paid my bills I had no money left to buy grocerys

  • Thank you for sharing DGarroutte! Sometimes the creditors aren't happy but we need to take care of ourselves first! Good luck and please keep us updated on your success!

  • One thing that is leading me to CareOne is the lack of harrassing phone calls.  I have had email discussions with another company with an F rating.  I get 3-4 calls/day 2-3 emails/day pleading for a phone call.  They have lots of "awards" posted on their site.  It is become clear who is working in my best interest. I feel safer with CareOne since they seem to let you go at you comfort level during this enrollment process. NO phone calls, yet.  I am new to needing help with debt, as are most of us.  With 30% LOANSHARK rates from several creditors, I have no choice.  This "other" company makes me feel like I am in shark infested waters and they are waiting for me to invite them into the water.

  • This blog will discuss what you can expect after the 6 th month on your Debt Settlement plan. For many of our customers this is a crucial point in their plan.

  • I will be in the dept settlement plan 3 months and have already had a settlement agreement with one of the creditors.

    This month will be the second payment to them and March that one will be paid off. I am very pleased with careone.

    They are right about Bank Of America they are the only ones that has really been harrassing us. We get 6 or more phone calls from them a day,but it's not bothering me. I just tell them careone is taking care of my settlement and you need to call them good bye.

  • I am going into my 2nd month with my debt settlement and recieve dozens of phone calls a day, but I don't answer. Is it best to not answer, unplug the phone, or talk with them? Not sure what the best actions are for me at this time.

  • Hi everyone. I just joined CareOne today. My wife and I had no choice but to enroll in the debt settlement program. I have been self employed for six years and this past year business was next to nothing. We tried to make it through the storm and have exhausted our savings. I have had customers file bankruptcy which left me paying thousands in supply house debt and taxes.

    Even tried to find a job to no avail.

    Anyway, I am sure this will give us the breathing room we need to recover.

    I researched many credit management companies and CareOne came out by far the best and most recognized.

    Best of luck to all.

  • Good morning everyone and thank you for reading my blog. If a creditor is calling you it is ok to speak with them and let them know you have hired CareOne to help with you with your debt. It is important to let us know if the debt moves from a primary creditor like Bank of America to a collection agency so communication with your creditors is a good thing. Thank you again for reading my blog, Straight Talk on Debt.

  • thank you Debt Settlement: Months 1-6 it really helps :)

  • Set up an answering machine through an online service which announces: "If you are calling regarding collecting a debt, I am going through financial hardships and am participating in a debt settlement program with CareOne.  Their number is 1-888-888-CARE.  The best way to communicate with me is by writing because I am hard of hearing.  Please leave your name, company, phone number, extension and the reason for this call, including any pertinent account information.  Without that information, your call will not be returned.  Please provide the information requested and your message will be returned within a reasonable time."  

    Let the creditors and collections agency harass that answering machine all the time.  I really hate those dumb automated calls that put you on hold when you answer.  It's easier to screen the calls, write down the messages, and forward them on to CareOne.

  • yea, i am just signed up for this, the DMP was too high for me to handle, in my budget.  I have sold a lot of assets over the past two years to make up the difference in my income to what I owed and kept using credit as I had no available income to pay mortgage,car,food and etc... kept digging that debt hole no matter what i did.  I am sure I will get those calls in saying what happened and why as I have not missed a payment but I am out of assets to sell and no new revenue coming in.  I am ready to get out of the debt hole.

  • This is great I just signed up today and really looking forward to gettin out of debt

  • I have been making payments since Dec and im still nervous that this decision is going to be a bad one. we are certainly in a better siutation than before not great just better. each month i see the payment come from our account but see no action. patient- sometimes. scared- oh yes. does it get any easier? outerbanks

  • Hey all...I enrolled in CareOne recently and have had two payments into escrow so far. I have two creditors and have been receiving regular calls from one of them (Citi Financial) - they call my work, cell, home...but I've already told them I'm in a debt settlement program.

    My only question - when I signed up I was told I could be out of debt in about 21 months, but when I check my tracker it says 4 years! How can there be such a variance? I live in North Carolina, and as I understand it, none of my escrow balance is used for any fees, just toward my debt. Hoping I'm correct on this.

    I know it will take several months to build up the escrow balance before making any negotiations with the creditors, meanwhile the balances get larger with late fees. I know I have been advised this would happen. I am looking forward to the day this is a thing of the past. I got a credit card with a smaller limit (300) so I could keep myself disciplined and continue to work on building my credit back up with regular, consistent payments.

  • Good afternoon and thank you for reading my blog. As we have discussed in multiple blogs, settlement can be a bit more challenging because of the nature of settlement. Essentially you are telling the creditors you are no longer able to afford to make payments, or pay back the full balance of what you owe. Please remember that 21 months is only an estimate, based on a calculation of your monthly payments and all of your creditors accepting 55% of the original balance. Please be aware that it may take longer as there are not any hard and fast rules in debt settlement. I would also suggest you stop using the credit card, even if you are paying the balance in full each month. Imagine a creditor's response if you tell them you can't afford to pay them, however you are paying one of their competitors? Continuing to use that credit card may impact the success of your settlement plan. Thank you and please let me know if you have any questions.


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