5 Must-Ask Questions Before You Sign Up for a Debt Relief Program

How to protect your financial future while settling credit card debt for less than you owe

If you're drowning in credit card debt, facing late notices, or getting calls from collectors, you're not alone—and you're not out of options. Debt relief programs offer a possible path toward financial freedom, allowing you to settle debt for less than you owe.

But before you sign any contracts or stop making payments, it’s critical to understand what you’re getting into.

Debt relief companies often help negotiate with creditors to reduce your total balance, typically in exchange for a lump-sum payment. This process can lead to savings—but it also carries serious risks, including a temporary hit to your credit score and even the potential for lawsuits.

If you're considering a debt solution, start by asking these five must-ask questions during any debt consult. Your future financial health may depend on it.

1. Are You a Member of the American Association for Debt Resolution (AADR)?

Not all debt relief companies are created equal. One of the best ways to weed out bad actors is by verifying whether a company is accredited by the AADR. Member companies are held to rigorous standards and must pass independent audits to ensure compliance with state and federal regulations.

Even if a company is AADR-accredited, do your homework:

• Look up their Better Business Bureau (BBB) rating
• Read customer reviews
• Search online for the company’s name with terms like “complaint” or “scam”

These steps can save you from partnering with a company that prioritizes profits over your financial wellbeing.

2. Is Debt Settlement the Right Debt Solution for Me?

A trustworthy company will not rush you into a program. Instead, they’ll take time to understand your full financial picture. They might suggest alternatives like debt consolidation, credit counseling, or even bankruptcy—whichever is most appropriate for your situation.

If a debt relief company is pushing you into a program without understanding your debt, that's a red flag. The Federal Trade Commission recommends avoiding companies that don’t fully explain your options or that pressure you into immediate enrollment.

A true partner in your financial recovery will help you explore all possibilities before committing.

3. How Much of My Debt Can You Realistically Settle?

Be wary of bold promises. No legitimate debt relief company can guarantee to reduce your debt by a certain percentage. While many clients see significant savings, creditors are under no obligation to negotiate or accept settlement offers.

Still, companies should offer an estimated savings range based on:

• Your enrolled debts
• Their past negotiation results
• The types of creditors you’re dealing with

According to the AADR, the average settlement amount is about 50.7% of the original balance. But after factoring in fees and taxes, your net savings might be closer to 32%. Be sure to ask how they calculate your estimated outcome—and request those details in writing.

4. When Will I See My First Settlement?

Debt relief is not an overnight solution. Typically, you’ll make monthly deposits into a dedicated account while the company negotiates on your behalf. You may not see your first settled account for 4–6 months, depending on how quickly you save and how flexible your creditors are.

According to AADR research, most clients who fully commit to the process begin seeing settlements within the first year. But some may not resolve all their debts, especially if:

• They're unable to keep up with deposits
• Creditors file lawsuits
• Negotiations stall

Ask the company what percentage of their clients settle debts within 3, 6, or 12 months—and what support they provide if legal action is taken against you during the process.

5. What Are Your Fees, and When Do I Pay Them?

Under FTC regulations, it’s illegal for debt settlement companies to charge upfront fees before a successful negotiation. Instead, legitimate companies usually charge:

• A percentage of your enrolled debt
• Or a portion of the amount saved through negotiation

The average fee is around 16.8%, but some companies charge up to 25%.

You may also be required to pay:

• A monthly maintenance fee for the dedicated savings account
• Administrative fees for program management
• Legal fees, if legal assistance is included in your package

Make sure you get a full breakdown of all fees in writing before enrolling.

Also, keep in mind that settled debts may be taxable income. If the forgiven amount is over $600, you could owe taxes unless you qualify for insolvency under IRS rules.

Don’t Rush Into a Decision

Working with a debt relief company can be a strategic step—but it needs to be a well-informed one. Scams and poor guidance can worsen your financial situation and add stress to an already overwhelming experience.

Before signing up, always:

• Ask detailed questions
• Request documentation
• Compare several companies
• Review your options with a qualified debt consult

Debt relief is not one-size-fits-all. Whether your goal is to eliminate credit card debt, avoid bankruptcy, or simply regain control, the best results come when you're informed, cautious, and proactive.

Final Thought

Finding the right debt solution starts with asking the right questions. If a company avoids transparency, rushes the process, or makes grand promises, it’s time to move on. On the other hand, a company that’s honest about the risks and upfront about the work involved is more likely to be a partner you can trust.

Because in the world of debt relief, credibility and clarity matter as much as savings.