What Is Debt Settlement?
Debt settlement is an agreement in which a creditor accepts less than the full amount owed to resolve a debt. It is usually negotiated after accounts are seriously delinquent, either directly or through a settlement company that charges fees. Settled accounts are reported as such, which can affect credit.
Possible Trade-Offs
Settlement typically follows missed payments, which damage credit, and forgiven debt may be treated as taxable income in some cases in the US.
Settlement vs. Consolidation
Consolidation combines debts into a new loan and repays them in full; settlement reduces the amount repaid.
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🔗 Related Terms
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Last updated: September 29, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.