What is freedom debt relief? Is it seen as a normal solution to debt in the US?
Posted by hahachickengobrr@reddit | AskAnAmerican | View on Reddit | 53 comments
Saw quite a few ads for this while visiting my cousin in Texas. Where I’m from, debt usually means paying it off fully or bankruptcy. What exactly is it? Is it possible to have programs like this everywhere? Is this an option that’s unique to the U.S?
ThoughtSenior7152@reddit
It’s a common route here for people who don’t want bankruptcy on their record.
Word2DWise@reddit
It’s basically a scam. You give money to a company that manages repayments for you, rather than you do it yourself. Again, scam.
deuceching@reddit
Freedom Debt Relief is the biggest and oldest debt settlement company in the US. It’s an option for people who can’t keep up with minimum payments and don’t want to (or can’t) file bankruptcy
WhzPop@reddit
You need to be really careful signing up for these companies. They set up an account and you put money into it monthly until there’s enough to start paying off your credit cards. This is after the very high fees are paid. They work with credit companies and one of their tactics is to negotiate away any fees and interest. It can take a looooong time and in the meantime you’re not supposed to be paying any of your debt so you’re being called and your debt is growing with fees.
I was hired a few times to sign the documents with clients. I did about three and refused anymore. They didn’t feel ethical to me and it made me uncomfortable to be helping them sign on clients. The fees were really high and it would be many months before they started on your debt. There were lot of complaints online and with the BBB.
If you have the wherewithal, you can actually do some of this yourself. Of course you have to be disciplined. Depending on what country you live in there may be non-profit organizations that will help.
Charming-Kiwi-9277@reddit
You have to pay the company to “help” you settle these debts. It is for profit. If you have outstanding bills that you can’t pay, it is always best to talk to the holder of the debt!
MrWiltErving@reddit
Freedom debt is a settlement company. They negotiate with creditors to help you pay for less than what you owe them if you're dealing with unsecured debt like credit cards. It’s a way to get out of debt if you can't handle what you currently pay each month.
RockingUrMomsWorld@reddit
Companies like Freedom negotiate with creditors to reduce the total amount you owe. They do this by making you stop paying regular payments and set aside funds. The process makes your credit take a hit though.
RunUpbeat6210@reddit
It's a debt settlement program where they negotiate with your debt down so you pay less than the full balance. Basically the option if you're spending too much each month on your debts and can take a hit to your credit. It’s common in the US because bankruptcy laws and credit systems here basically make it a middle ground option, but it’s not something you see everywhere. It’s more of a last resort tool than a first choice because hits your credit.
Ok_Gas5386@reddit
When a lender doesn’t think you’ll pay them back, they’ll often resell your debt for pennies on the dollar to a third party collection company. The third party might offer you a “deal” where you don’t have to pay back the full amount—that’s a business decision to recoup their relatively modest investment (usually with a healthy profit) not out of the goodness of their hearts.
I don’t know about this particular company but it sounds like they’re one of those third parties.
Red_Beard_Rising@reddit
Or a lawyer asks for the loan's chain of title hoping that something got lost along the way (especially if it's been sold more than once) and they can't prove that they actually own the debt. Since they can't prove they own the debt, you owe them nothing.
BouncingSphinx@reddit
I think it’s the other way around. You as a consumer call Freedom Debt Relief to have them negotiate a settlement on your behalf rather than the creditors selling your debt to a collections agency.
Olay_Biscuit-Barrel@reddit
No, the debt settlement company will tell you that the debt needs to be charged off by the original creditor, then they negotiate the settlement with the company that buys the debt as the other poster stated.
Source, have worked as a debt settlement agent and done these negotiations.
Traditional_Math_763@reddit
Freedom Debt Relief is basically a way to pay off unsecured debt when you can't handle the minimums. You make monthly payments to the program, and they work with your creditors to try to lower the total you owe. From that, you end up paying much less each month. It’s not the same as paying everything off yourself, and it can take a few years, but for some people it’s a more manageable alternative to bankruptcy. It’s mostly a U.S. thing since debt laws and creditor negotiations vary a lot by country, so programs like this aren’t really available everywhere. You will hurt your credit though, so you would have to make sure it's really worth paying less each month.
Normal_Occasion_8280@reddit
Debt can be negotiated down rather than defaulted on just about everywhere on the planet.
dolado13@reddit
Freedom Debt Relief is basically a debt settlement company. You stop paying your credit cards, they negotiate with your creditors to settle for less, and you make one monthly payment into an account. It usually takes 2 - 4 years. The catch is your credit score tanks during the process. People choose it because they are nearing bankruptcy, want to avoid it, and because FDR gives an actual end date to the end of debt.
Icy_Consideration409@reddit
There are other catches too. Yes, your credit score will tank, but your creditors aren’t going to passively sit around for a few years. They’ll send the debt to collections and a huge number of debt settlement customers get sued by their creditors.
Also, the interest continues to accrue, so although a lucky consumer may end up settling a debt for 50 cents in the dollar, after a year or two into the program their debt is a lot higher than it was when they enrolled. Take off the debt settlement company’s fee and the tax due to the IRS (forgiven debt is taxable) and a “successful” program is often just a wash.
If the consumer had opted for bankruptcy instead they’d be better off, and their credit score would get better sooner.
Every-Attitude7327@reddit
That isn’t true. Creditors don’t always jump straight to suing, a lot of them do settle because getting part of the balance back is better than nothing. Interest usually stops once the account charges off, so it’s not like the debt just grows forever. Forgiven debt can be taxable, but there are exclusions if you’re insolvent (which OP would be). Bankruptcy isn’t automatically better either since not everyone qualifies and it stays on your report up to 10 years. Settlement and bankruptcy both have pros and cons, it just depends on the situation.
Icy_Consideration409@reddit
Even if interest only accrues for 6 months after a consumer stops paying (it’s likely longer than that), that’s still thousands and thousands of dollars in interest that’s accumulating. The average debt settlement client enrolls about $40k in credit card debt. With credit card APR’s that’s a huge interest bill.
Add on the DS company fee (commonly between 25 and 30% of the enrolled debt) and that average consumer faces a huge cost from a debt settlement program.
fakesaucisse@reddit
There is definitely a sense of internalized moral failing among people who are faced with bankruptcy. My dad had a mental breakdown (as in, so bad he was hospitalized for a few months) when he realized he had to file for bk. He really thought he'd lose everything and everyone in his life with that stain on his record.
It ended up being the best financial decision he's ever made. He didn't lose his house or car, he settled his debts and learned to live on cash and a debit card only, and after a few years he was able to build some savings. Now his credit is back in good standing and he bought a new (sensible) car and has started retrofitting his house to be more disability-friendly so he can age in place there.
Tacklinggnome87@reddit
In my experience, the credit card companies charge off the owed amount after 6 months and don't accrue more interest. Though that isn't a requirement and even charged off accounts can still accrue interest if the agreement and state law permit it.
dontlookback76@reddit
Six months out of Chapter 7 and we bought a 2016 Kia Soul at 6% and refinanced to 4% 6 months later. Tons of credit card offers. This was in 2020 just as masking started. Bk hurts you less than not paying the bills and facing legal actions.
EightOhms@reddit
To be fair, part of why folks fresh out of bankruptcy get lots of credit card offers is because the banks know they can't file for bankruptcy again for a bunch of years.
dontlookback76@reddit
Very true. I was going to put that in there but got lazy, lol.
Thespiffybrewer@reddit
I’m not in the program myself, but I started looking into debt solutions for a family member after they fell behind. I even tried calling a few creditors once things went to collections, but it didn’t get anywhere. After digging through reviews, Reddit threads, and even some AI write-ups, Freedom Debt Relief kept coming up as the main debt settlement company people actually use.
It’s a legitimate option if you’re looking to settle debts. The setup is you stop paying creditors directly, save into a separate account, and FDR negotiates to settle for less than what’s owed. Bankruptcy can be a better fit for some, and if someone can still manage payments and wants to protect credit then settlement isn’t right. There are fees, usually around 20–25% of the enrolled debt, but for people who are already behind it can be a valuable service that gives structure and a way forward.
Dassushicat@reddit
Yes, that is a normal solution, but usually only for people in real financial hardship. You are referring to one of the top debt settlement companies in the U.S. The idea is you stop paying creditors directly, save into a separate account, and the company negotiates to settle your balances for less than the full amount.
It is not for everyone. If you can still keep up with payments and want to protect your credit, this is not the right option. But for people who are already behind and facing collections, it can be a workable path short of bankruptcy.
mataw95@reddit
Freedom Debt Relief is a U.S. company that helps people settle debt for less than what they owe. My girlfriend signed up when her credit cards got out of hand and the payments were impossible.
Instead of paying the banks, she puts money into one account and Freedom Debt Relief uses that to negotiate. They’ve already settled a couple of her balances for much less than the original amount. There are fees, and it takes time, but so far it’s done what they said it would.
Nothing else was working, and she looked at debt management plans, bankruptcy, and even tried settling on her own. In her case Freedom Debt Relief turned a mess into something she can actually manage.
Tacklinggnome87@reddit
Looks like it is a debt settlement company. I am not familiar with this one but I work with a few, including J.G. Wentworth. Basically, they work to settle the debt you owe. They instruct you to stop paying your creditors and instead pay them some amount. (which is based on the amount the size of the debt) They will put that into escrow and use that account to negotiate settlements with the creditor. So you owe $30k they may negotiate it to 15k over 24 months. Then they typically pay out the money on that schedule.
They make their money in two ways: one is that they charge you a fee every draft period (like $10) but the main way is you agree you will pay them 20-25% of the original amount if they settle it for less than that amount. So on the example above, you come in with 30k, they settle it for 15k, you owe them $7500 which they will take out has they are sending your creditor the settlement money. But if debt grows to 40k through interest and they settle to $30,001, they get nothing.
People do it because they can't handle the amount of debt they have and they either don't want to do bankruptcy or bankruptcy will not be able to provide them with much relief.
In addition to the fees, debtors should know that your credit will take a hit. Like expect it to be in the toilet for a number of years, though most are already in horrible spot with their credit. Typically, creditors will charge-off the accounts after 6 months which usually halts interests (though not always). They'll either sell it to third-parties or send it to collections, but often they'll just wait while doing a soft credit check now and again. Once they see you paying off other creditors, that's usually when they act, including by bringing a lawsuit. (That's where I work, I get contracted out to defend the debtors being sued by their creditors) Then they'll settle, but often for larger amounts than what pre-lit settlements will be. Another consideration is that any amount owed that your creditor agrees to waive in a settlement is income you owe taxes on. So the example above, where 30k becomes 15k, you know owe taxes on the 15k you don't have to pay back.
RevolutionaryRow1208@reddit
They're just a corporation that helps consumers with debt relief.
D3moknight@reddit
They are more or less negotiators. Most debt in the US is bullshit. If you look at the money borrowed vs the money "owed", it's often double or more the original borrowed amount.
infinitefacets@reddit
I’ve been seeing those commercials all my life and had no idea what it was. Haha this has been informative.
therealbamspeedy@reddit
There is a reason this ad is always playing on late night radio.
Novel_Willingness721@reddit
There are tons of legal loopholes in the US system. Companies like FDR, navigate those loopholes to “help” their clients. However a lot of them are scams: the customer ends up paying just as much if not more to the “help” as they would just paying off their debt.
I don’t know if FDR is a scam or not, I’ve never looked into them.
Vivaciousseaturtle@reddit
Correct. The payment might be lowered to ease immediate burden but then the rates go up making the paid amount so much higher overall
jessek@reddit
I don't know much about how they work, but I've always gotten the feeling that those companies are borderline scams that prey on desperate people.
ChallengeMindless466@reddit
It's a middle man company that works to negotiate settlements with creditors.
goodsam2@reddit
Ideally packaging your plans at higher % to move to a lower % interest making the loans more affordable.
Fun_Inspector_8633@reddit
Most of them are flat out scams and the rest are borderline scams. They can help people reduce debt by consolidating and negotiating a settlement with the debt holders. This is generally better than declaring bankruptcy but I’ve heard that future lenders look at it as the same or even worse. You can typically do the same thing they do yourself if you have the time to do it and more often than not you’re much better off working with your bank to see you qualify and get a debt consolidation loan.
largos7289@reddit
It's scam-ish in a way, that you are paying a company to negotiate your debt on your behalf. So let's say that you owe 10k. This company will take a payment up front or a % of the debt and negotiate with them so say ok now you owe them 7k or what not and put you on a payment schedule. You are getting something but it's also something you could do yourself.
SomeDetroitGuy@reddit
It is a scam company that charges you money to ruin your credit and get you to declare bankruptcy.
BigoleDog8706@reddit
Bob getting you to rob Peter to ransom paul.
kmoonster@reddit
Hard to say, but it's probably a for-profit business that buys multiple forms of your debt and then offers you low interest and low payments (or high interest and small payments).
If you have a car, two credit cards, and a small loan this company would buy all four and give you just a single monthly payment. If you owe $10,000 combined they might offer you $75/month; of course, if you are only paying $75/month you would be paying for over ten years and even at low interest rates the consolidation company would make a massive profit. At $75/month you would repay the $10k with $15k over the course of 17 years.
It certainly simplifies your life by giving you just one payment, but it doesn't change how much you owe and often increases the total amount you will repay over the lifespan of the debt.
Mr_MacGrubber@reddit
I doubt car loans are included. You do pay less with these companies. You quit paying the debt and the company settles with the lender for a lesser amount. If you can’t pay your debts this is an option vs things like bankruptcy. The only downside for you is your credit score tanks big time. So you might have $100k in debt, the company settles with the lenders for $50k and charge you $75k. Obviously just made up numbers but it’s the general gist of how they work.
ArOnodrim_@reddit
A debt consolidation company.
Embracedandbelong@reddit
It’s not like a program that “frees” you from debt. It’s a business that, if you hire them, will talk to all your creditors for you and get your payments into one lump sum payment that you then pay. You still pay off all your debt, it’s just one payment instead of several. Debt “Relief” companies can be very scammy though and often when you crunch the numbers, they are not saving you any money. Sometimes they are actually costing you a lot more
Wide-Veterinarian373@reddit
In the U.S., credit and debt are weirdly normalized. A lot of people get stuck in cycles of credit card debt. Debt relief programs are kind of a “middle path” between bankruptcy (nuclear option) and slogging it out with minimums and living a life of extreme caution, frugality and second guessing.
SabrinaFaire@reddit
It's a debt consolidation company. They negotiate your debt down, possibly by buying it out and you paying them. Normal? Kind of, but not really recommended. It can hurt your credit, but it's better than not paying your creditors. Really you can negotiate yourself, but most people get overwhelmed.
ATLien_3000@reddit
It's a scam.
twotall88@reddit
It's a business that makes money on ruining your credit score (if you still have one) in order to help negotiate not paying all of your debt.
They basically tell you to stop making payments so it can go to collections and at that point the debt collectors will generally be willing to collect a percentage of the debt rather than not get paid at all.
dolado13@reddit
Freedom Debt Relief is basically a debt settlement company. You stop paying your credit cards, they negotiate with your creditors to settle for less, and you make one monthly payment into an account. It usually takes 2 - 4 years. The catch is your credit score tanks during the process. People choose it because they are nearing bankruptcy, want to avoid it, and because FDR gives an actual end date to the end of debt.
Maximum_Pound_5633@reddit
Its a scammer company that preys on the destitute.
WolverineHour1006@reddit
There are a lot of companies out there that are basically scams, promising to help desperate people get their debts paid off. It sounds like you saw ads for one of those companies, called Freedom Debt Relief. Sometimes people don’t know how much they are actually liable for and end up paying these companies more than it would cost to just pay off their debts, or pay completely unnecessary fees to these companies to do things that the debtor could take care of themselves. These companies prey on desperate and uninformed people. Sometimes people end up paying them lots of money and still owe these companies debt.
There are also (semi-) legitimate companies/lawyers who will “buy” your debt from you and then negotiate with the debtor to pay it off with a much smaller amount than what is owed. They make money by you paying them more for their service than they need to pay to clear the debt.
No-Point-6492@reddit
To answer your “why not everywhere?”.. it really comes down to the U.S. system. Credit scores run everything here (rent, car, jobs sometimes). Programs like Freedom exist because the system makes people so dependent on credit in the first place
ophaus@reddit
It's a business.