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    Debt settlement

    Debt settlement companies are usually for-profit. They offer debt management plans by negotiating monthly repayments or lump sum payments with creditors, usually at a lower amount. Sometimes debt settlement companies collect payments until there is enough to pay a bill. This continues until each bill has been paid. However, this can lead to you still receiving contact, or legal action, from creditors. Some debt settlement companies can mislead you, charge high fees, or delay making payments to creditors.

    Cost: Debt settlement agencies cannot charge more than a one-off fee of $50 (per creditor) before the debtor starts making payments when they are paying by installments. They can then charge up to 15% of each installment made. When a debt settlement agency negotiates a single payment to creditors, the debt settlement agency can charge up to 10% of the original debt amount for their services.


    You should research debt settlement organizations to ensure you are using a reputable organization.

    The debt settlement company should review your financial situation, including their income and expenditure and all of their outstanding debts.

    The debt settlement company will negotiate a payment plan or lump sum payment with your creditors, usually a reduced amount, or with reduced interest or fees.

    The debt settlement company will ask you to sign an agreement for the debt management plan. You should ensure they fully understand the terms of the agreement, for example, when the debt settlement agency will make payments to each debtor.

    There is a 10 day cancellation period once you have signed and received your written contract from the debt settlement agency.

    Find out more:

    CLEO information about credit counselling and debt settlement