Debt-settlement cost calculator
Settlement is sold as "pay less than you owe." That part is true. The full price adds a company fee and a tax bill on the forgiven amount — the part most people don't see coming. Here's the whole number.
The full price, before you sign
Illustrative model · actual rates and terms varyHow this is calculated
Three costs make up the total. First, what you pay creditors to settle. Second, the company's fee, charged on your enrolled debt. Third, income tax on the forgiven part — the IRS usually counts forgiven debt as income.
total = paid-to-creditors + company-fee + tax-on-forgiven
It leaves out lawyer costs if a creditor sues. It also leaves out the missed payments that drive your credit down. By law, a real firm can't charge you until a debt is settled.
Settlement can still beat years of minimum payments for the right person. But it's a last resort. Start with a a no-cost nonprofit credit counselor — the same debt, without the credit hit or the tax bill.
Weigh all four routes on the get-out-of-debt hub.