Today is March 27, 2025, which sounds like a science fiction date to this old guy. But I’m still here providing debt settlement services in 2025. I’m still helping consumers struggling with unsecured debt obligations. With the ongoing uncertainty over inflation and the economy, it’s more important than ever for people to have reliable truthful information on debt relief options.
I settled my first debt for a client in 1997, and it’s hard to believe that was 28 years ago! I was one of the first to offer debt settlement for consumers. In those days, debt settlement for consumer debts was brand new. I remember talking with longtime debt collectors who did not even understand what a settlement entailed!
Over the past quarter of a century, I have helped many thousands of consumers face up to their debt issues and seen millions in debt get resolved through negotiated settlements. I’ve also seen the debt settlement industry go through massive turmoil, with changes that have shifted things far more in favor of the debt companies than the folks they are supposed to be helping.
Why I’m Not a Fan of the Debt Relief Industry at Large
I’ve been a part of this industry for a very long time, but I remain pretty disgusted with the manner in which the large debt settlement firms operate. There are several reasons for this. The large companies tend to downplay the LEGAL RISK consumers face from collection lawsuits. Nor do they help manage that risk very effectively. In fact, they add to the risk by using outdated tactics, like sending out notices too early to creditors.
They also try to persuade people that “bankruptcy should be avoided at all costs,” which is very bad advice. Why? Because Chapter 7 bankruptcy is GOOD, and Chapter 13 bankruptcy is BAD. There is a world of difference between a bankruptcy filed under Chapter 7 vs. Chapter 13, yet you will search debt settlement company websites in vain for any discussion of the crucial differences.
The reason they do that is because they aim for the largest volume possible of enrolled clients. Since about 7 out of every 10 people who file bankruptcy are eligible to simply wipe out the debt under Chapter 7, they don’t want to exclude that potential pool of prospects. Sadly, that means they are pitching their program to people who would actually be better off in bankruptcy.
The simple truth is that Chapter 7 is almost always a better option than debt settlement. It is primarily people facing a protracted FIVE YEAR bankruptcy petition under Chapter 13 who should be considering debt settlement instead.
Be Careful When Comparing Fees for Debt Settlement Services
The above problems are bad enough, but then there is the RIDICULOUS FEE STRUCTURE established by the larger companies. Most of them charge a fee that’s a percentage of the debt balances enrolled in the program, typically in the range of 20% to 30% of the debt. The problem here is that this fee method removes any incentive for the company to even bother negotiating a better outcome. If you are going to make the same amount of money regardless of how much or how little work you put in, and no matter the actual result, human nature means that you won’t probably go the extra mile to help out a client.
The best debt settlement fee structure for YOU (i.e., the client) is one based on a percentage of the SAVINGS achieved through the negotiated settlement. In my practice, I charge a very reasonable 20% of the savings off the enrolled balance, and NOT a percentage of the debt itself. Run a few examples through a calculator, and you will quickly realize that this method creates a win-win scenario between the service provider and the client. It also means far more of your hard earned money going toward resolving the debt balances keeping you awake at night, and less going toward paying the marketing costs for some debt company!
Settlement is What the Banks Do Anyway
In 1997 I started in the debt settlement business as a one-person consulting practice with the aim of helping local clientele in San Diego. It quickly became clear to me that settlement is what the banks do to reduce losses on defaulted debts. In the year 2000, I joined the country’s first large scale debt operation and increased their client base from 40 customers to more than 4,000. As I worked on scaling up the company, I learned about all of the problems that a volume approach creates. I also learned that the banks were not very pleased with the existence of debt settlement companies!
I left that firm in 2004 and set out on my again. I created an 8-hour audio training seminar that taught people how to settle debts on their own, minus the big fees. Then in 2016, I went back to offering full service debt settlement again, primarily because I had observed that most people wanted a level of support that exceeded what I could offer through simple education and coaching.
It’s now 2025 and debt settlement is no longer something new or different in the financial world. In fact, the only reason that debt settlement companies exist is because the BANKS are still the ones who want to settle. They do that for two reasons — to reduce a loss that they are about to write off due to non-payment, or to recover against a loss already taken. The basic concept of the “bird in the hand” is what drives debt settlement. None of this has changed in the past 28 years.
However, the basic principle that banks or creditors want to reduce losses or recover against them does NOT mean they tend to make it easy on people to settle. That is where a professional service like ZipDebt.com and my superior Tailored Debt Settlement method comes into play. When your day to day business is negotiating settlements, it’s possible to see the landscape from a higher altitude, and thereby take most of the guesswork and uncertainty out of the process.
Debt Settlement in 2025 and Beyond: Cash Loans & Lawsuit Risk
What’s new in 2025? Two major factors are very different now in the debt settlement space, and consumers need to be aware of these developments:
1. CASH LOANS: Large balance personal loans reaching charge-off faster and potentially blowing up an old fashioned approach to debt settlement planning.
2. LAWSUIT RISK: The risk of being sued is far higher now, with all the major creditors being more aggressive and using collection litigation to recover.
Let’s discuss these two key factors in a little more detail.
First, it used to be that ALL of the debt included in settlement programs was credit card debt issued by the top credit grantors (Chase, Citibank, Bank of America, Wells Fargo, U.S. Bank, Discover, etc.). It was very rare to see a personal loan included in the mix. But since the Great Recession of 2008-2010, a different class of creditor stepped up to fill the lending gaps that opened up when the banks started getting more careful about granting credit. We are talking about lenders like SoFi, Upstart, Upgrade, Best Egg, Lending Club, Prosper, and others. The balances tend to be higher on these loans, $15,000 up to $100,000, compared to typical credit card balances in the range of $5,000 to $15,000.
One important thing to understand is that personal loans will reach the charge-off deadline after only FOUR MONTHS of delinquency, compared to six months for credit card debt balances. The shorter timeline to writing off the debt means things move faster on personal loans, with risk mounting much more quickly. Larger balances also justify the expense of pursuing recovery more aggressively. And nowadays it is very common to see a lender sell the account right after charge-off to a debt purchaser. These debt buyers routinely use litigation to force consumers to resume payments on a debt.
No Sugar Coating: Getting Sued is a Genuine Risk
Creditors in general are getting AGGRESSIVE again, with most of the major banks moving to collection litigation far earlier in the delinquency process than in previous years. It used to be that out of a dozen or so major credit card banks, perhaps ONE of them was being aggressive at a time, so it was easier to help people manage the risk they were facing. The others would eventually get around to escalating, but not for many months, sometimes a year or more. Not anymore! Now they are almost all being aggressive.
Without CAREFUL RISK MANAGEMENT layered into the process, unsuspecting consumers are going to find out the hard way that traditional debt settlement programs will be less and less helpful at managing unworkable debt loads.
The bottom line is that debt settlement remains a viable solution in 2025 for avoiding Chapter 13 bankruptcy, but thorough ANALYSIS and PLANNING are required up front. This is simply not possible using the cookie cutter one-size-fits-all approach employed by the larger debt settlement firms. My goal here at ZipDebt.com is to provide unfiltered advice based on what is happening in the real world of debt settlement in 2025. If I don’t believe you are a good fit for this approach, I will tell you that point blank rather than try to “sign you up” to my program.
If you are struggling with out-of-control debt, please feel free to EMAIL ME AT [email protected] with some information on your situation. Tell me how much debt you have and what banks or lenders you owe it to. We’ll review your situation together to figure out whether or not debt settlement makes sense for your financial scenario.
