What debts are eligible for settlement?
Most unsecured consumer debt is eligible for settlement: credit cards, medical bills, personal loans, private student loans, department store cards, collection accounts, repossession deficiencies, and unsecured lines of credit. Secured debts (mortgages, home equity loans, auto loans) and government-backed debts (federal student loans, tax debt, alimony, child support, criminal fines) are not eligible. Most business debt also can't be settled through consumer debt settlement programs.
Short version
- Eligible: unsecured consumer debt where the creditor can't repossess collateral.
- Not eligible: anything secured by an asset, anything owed to the government, family-law obligations.
- Eligible specifics: credit cards, medical bills, personal loans, private student loans, collection accounts, repossession deficiencies, lines of credit.
- Not eligible specifics: mortgages, HELOCs, auto loans, federal student loans, tax debt (IRS/state), alimony, child support, criminal restitution.
- Gray area: unsecured business debt (sometimes eligible if personally guaranteed), recent debts (creditors may refuse if the account is <90 days old).
The full answer
Eligible unsecured consumer debts
Credit cards — the most common debt we settle. Visa, Mastercard, Amex, Discover, store cards, gas cards.
Medical bills — hospital bills, specialist fees, ambulance bills, medical equipment. Sometimes medical providers will negotiate directly before sending to collections; those settlements count.
Personal loans — unsecured installment loans from banks, credit unions, or online lenders.
Private student loans — loans from private lenders like Sallie Mae, Navient (private portfolio), Discover Student Loans, SoFi, etc. Federal student loans are NOT eligible.
Collection accounts — once an original creditor sells your debt to a collection agency, the collector typically paid pennies on the dollar and is often willing to settle for 20-40%.
Repossession deficiencies — if you had a car repossessed and the lender is pursuing you for the shortfall, that deficiency balance is unsecured and settleable.
Lines of credit — unsecured LOCs, signature loans, and similar.
Not eligible — and why
Mortgages, HELOCs, auto loans — these are secured by property. If you stop paying, the lender takes the asset back. They don't need to negotiate; they already have the leverage.
Federal student loans — the federal government has different tools (income-driven repayment, forgiveness programs, Public Service Loan Forgiveness). It also has extraordinary collection powers (garnish tax refunds, Social Security, etc.) that make them extremely unlikely to settle. Most private settlement companies won't touch federal loans.
Tax debt (IRS or state) — requires a formal Offer in Compromise through the tax authority itself, not debt settlement.
Alimony, child support, criminal restitution — family-law and court-ordered debts can't be negotiated away through private settlement. Modifications require going back to court.
Gray areas
Unsecured business debt — technically possible if the debt is personally guaranteed by you as an individual and the business has shut down. We look at these case-by-case.
Recent debts — creditors almost never settle accounts that are less than 90 days delinquent, because they believe you might still catch up. Newer accounts may need to age before settlement is realistic.
Secured debts after a voluntary surrender — if you give up the collateral (car, etc.) and the sale doesn't cover the loan balance, the remaining deficiency is unsecured and can be settled.
Related questions
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