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Hello, I have $60,000 of credit card and unsecured debt. I have talked with a company that is run by lawyers. They told me to set up my own bank account just for debt settlement. The monthly amount that I would put in the bank would be about half of what I am paying now. They charge 14% which is all witdrawn by ACH from my account over the first 13 months. When there is a settlement, they will have me make the payment from the account. Have you heard of this method?

Hello, thank you for the question. Yes, the process you describe is standard for debt settlement. Some companies will actually set up a separate “bank” account for you (often called a trust account) and you would make the monthly deposits into that rather than your own bank.

The reason why some debt settlement companies prefer a separate account, is so that you actually separate the “settlement money” from your “regular spending money”. By making that monthly payment into a 3rd party account it helps some people keep a separate pool of money that they know is being saved for the settlement. It also helps many to resist the temptation to spend that settlement money for other things while it builds in the account.

Debt settlement takes discipline and a firm commitment to wanting to finally get out of debt. Too many people enter debt settlement programs but don’t finish them often due to their lack of commitment. Best to you.