Free online Calculators

Debt Settlement Calculator

Calculate potential debt settlement savings and tax implications. Estimate settlement amount, forgiven debt, and total out-of-pocket cost.

Free to use
12,500+ users
Updated January 2025
Instant results

Debt Settlement

Total Debt
$25.0k
You'll Pay
$11.3k
Net Savings
$8.8k

⚠️ Debt Settlement Has Serious Consequences

Debt settlement is a last resort option that severely damages your credit score (100-150 point drop) and stays on your credit report for 7 years. Consider alternatives first.

Credit Damage: Settled accounts marked as "settled for less than owed"
Tax Implications: Forgiven debt over $600 is taxable income (IRS Form 1099-C)
Lawsuits: Creditors may sue you during the settlement process
No Guarantee: Creditors are not required to accept settlement offers

Additional Risk Factors

You have debts not in collections - settlement typically requires default
Monthly payment may be insufficient to settle within timeline

Potential Savings

$8,750

After fees, before taxes • 35.0% of total debt

Debt Forgiven
$13,750
After Tax Savings
$5,725
Current Debt
$25.0k
3 accounts
Settlement
$11.3k
45% of debt
Monthly Payment
$300
for 38mo
Total Cost
$16.3k
settlement + fees
Settlement:$5,400
Forgiven:$6,600
Settlement:$3,600
Forgiven:$4,400
Settlement:$2,250
Forgiven:$2,750

Important Notes

  • • Debts in collections are more likely to settle
  • • Creditors typically accept 30-60% settlements
  • • Must stop making payments (damages credit further)
  • • Settlements usually require lump sum payment

Lower = more savings but harder to negotiate. Typical: 40-50%

Funds accumulate until enough to make settlement offers

Settlement Summary

Total Debt:$25,000
Settlement Amount:$11,250
Debt Forgiven:$13,750
Months to Save:38
Total Accumulated:$11,400

Total Cost Breakdown

Total Out of Pocket
$19,275
Saves $5,725 vs. paying full amount

Important Considerations

  • Last resort only: Only consider if you truly cannot pay and other options exhausted
  • Get it in writing: Never pay until you have written agreement from creditor
  • Avoid upfront fees: Legitimate companies only charge after settling
  • Tax prep: Save for tax bill on forgiven debt - it's taxable income
  • Consult attorney: Consider legal advice before stopping payments

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