The moment I realized we had a real problem was when I added up all the credit card statements and the number was $47,000. We’d been making minimum payments for years, never quite facing the total, watching the balances creep up while telling ourselves we’d deal with it eventually. Eventually arrived when I did the math and saw that at minimum payments we’d be paying for eighteen more years and the interest would cost more than the original debt.
I started researching ways out. Debt settlement companies like National Debt Relief kept appearing in my searches, promising to negotiate debts down to a fraction of what we owed. It sounded too good to be true, which usually means it is. But I was desperate enough to look into whether these companies are legitimate and what actually happens when you use them.
What National Debt Relief Actually Is
National Debt Relief is a debt settlement company, meaning they negotiate with creditors to reduce the total amount you owe. They’re not a lender, not a credit counselor, and not a bankruptcy attorney. They occupy a specific niche in the debt relief industry.
Here’s how the process works. You stop paying your creditors directly and instead make monthly deposits into a dedicated savings account. Over time, that account grows while your debts go further into default. National Debt Relief then contacts your creditors and offers them lump-sum settlements for less than the full balance. The idea is that creditors would rather get something now than nothing through bankruptcy.
Once a settlement is reached, funds from your account pay the agreed amount and that debt is considered settled. You repeat this process until all enrolled debts are settled or you run out of money.
National Debt Relief charges fees based on the total enrolled debt, typically 15-25% of the amount enrolled. Fees are only charged after a debt is successfully settled, not upfront. This matters because companies that charge large upfront fees are a major red flag in this industry.
Is National Debt Relief Legitimate?
In terms of being a real company that actually does what it says, yes. National Debt Relief has been in business since 2009, is accredited by the American Association for Debt Resolution (formerly the American Fair Credit Council), and has an A+ rating with the Better Business Bureau despite having over 4,000 complaints filed, which sounds bad but represents a small percentage of their customer volume.
They’re licensed in the states that require debt settlement licensing. They don’t charge fees until settlements are completed. They follow the industry regulations that exist.
Legitimate doesn’t mean good idea for everyone. A company can be perfectly legal and still be the wrong choice for your situation.
How Debt Settlement Affects Your Credit
This is where the reality check comes in. Debt settlement damages your credit significantly.
When you stop paying creditors to save for settlements, those missed payments show up on your credit reports. Your accounts go delinquent, then get charged off. Collection calls start. Late payments, charge-offs, and settled accounts all remain on your credit report for seven years from the original delinquency date.
Your credit score will drop substantially during the settlement process. People commonly see drops of 100 points or more. The accounts don’t just show as settled either, they show as “settled for less than the full amount,” which tells future lenders you didn’t pay what you owed.
If you’re already in good credit standing and could realistically pay off your debt through other means, debt settlement trades current creditworthiness for potential debt reduction in a way that may not make sense.
If your credit is already damaged from missed payments and you’re realistically looking at years of struggling to make minimums, the additional credit damage may matter less because you’re already in trouble.
The Math on Debt Settlement
Does it actually save money? Sometimes yes, sometimes no.
Let’s say you have $50,000 in credit card debt and National Debt Relief negotiates settlements averaging 50% of the balances. You’d pay $25,000 to creditors plus about $12,500 in fees (25% of enrolled debt), totaling $37,500. You’d save $12,500 compared to paying the full amount.
But that’s not the complete calculation. You’d also need to account for taxes on forgiven debt, which the IRS considers income. If $25,000 in debt was forgiven and you’re in the 22% tax bracket, you’d owe $5,500 in additional taxes. Your actual savings drops to $7,000.
And there’s opportunity cost. During the years you’re saving for settlements and negotiating, interest continues accruing on some debts. Some creditors might sue you for the balance before settling, resulting in wage garnishment or legal fees.
Compare this to alternatives. A debt consolidation loan at 10% interest would cost more in total payments but preserve your credit. Balance transfer cards with 0% introductory rates could save interest while you pay down balances. Nonprofit credit counseling agencies offer debt management plans that reduce interest rates while you pay full balances.
The math favors debt settlement primarily when you genuinely cannot afford to pay the full amounts and your alternatives are either decades of minimum payments or bankruptcy.
Risks of Debt Settlement
Beyond credit damage, other risks exist.
Creditors can sue. Just because you stopped paying doesn’t mean creditors have to negotiate. Some sue to recover the balance, especially if amounts are large. A judgment can lead to wage garnishment, bank levies, or property liens. National Debt Relief includes legal support in their program but lawsuits still happen.
Settlement isn’t guaranteed. Some creditors refuse to settle or refuse to settle for acceptable amounts. You might save for months only to have a creditor hold out for more than you can pay.
Tax implications are real. Forgiven debt over $600 triggers a 1099-C from the creditor. That forgiven amount is taxable income in most cases. You might settle $20,000 in debt and owe $4,000 in unexpected taxes.
Fees add up. Paying 15-25% of your enrolled debt in fees is a significant expense. On $50,000 in debt, that’s $7,500 to $12,500. Those fees eat into any savings from the settlements.
The process takes years. Most debt settlement programs run 24-48 months. That’s years of collection calls, damaged credit, and financial stress.
When Debt Settlement Might Make Sense
Debt settlement isn’t for everyone, but it’s appropriate in some situations.
You’ve already missed payments and your credit is already damaged. If you’re past due on multiple accounts and facing collections anyway, the marginal credit damage from settlement matters less.
You can’t afford minimum payments. If making minimums requires choosing between debt and rent, you need a more drastic solution than just budgeting.
Bankruptcy feels too extreme or has consequences you want to avoid. Some people prefer settlement to the permanent record of bankruptcy, even though bankruptcy might discharge more debt.
You have unsecured debt like credit cards. Debt settlement works for unsecured debt. Secured debts like mortgages and car loans don’t work the same way, creditors can just repossess the asset.
You can actually save the monthly amount required. If you can’t make the monthly savings deposits, the program fails. You need consistent income even if it’s not enough for minimum payments.
When to Consider Alternatives
Debt settlement probably isn’t your best option if your credit is still good and you want to keep it that way, if you can realistically pay off debt within three to five years with aggressive budgeting, if you have mostly secured debt, if your income is too unstable to make regular savings deposits, or if your debt is primarily student loans, which aren’t typically settled.
Better alternatives for many people include balance transfer credit cards with 0% introductory APR if you can pay off balances during the promotional period, debt consolidation loans at lower interest rates than your current cards, nonprofit credit counseling agencies offering debt management plans that reduce interest rates and consolidate payments, negotiating directly with creditors for hardship programs or lower interest rates, or simply aggressive budgeting and the debt avalanche or snowball methods.
Our Decision
We didn’t end up using National Debt Relief. After researching the process, I realized our situation wasn’t quite dire enough to justify the credit damage and risks.
We went with a two-pronged approach. First, I called every credit card company and asked for hardship rate reductions. Two of them lowered our rates significantly, one by almost 10 points. Second, we consolidated what we could onto a balance transfer card and attacked the remaining high-interest debt aggressively.
It took us four years to pay off the $47,000. We didn’t save money compared to settlement, we paid every penny plus interest. But we came out with our credit intact, no tax surprises, and no lingering charge-offs on our reports.
That was the right choice for us. It wouldn’t be the right choice for someone who couldn’t make the payments we made or whose credit was already compromised.
Bottom Line
Is National Debt Relief legit? Yes, they’re a real company that settles real debts for many customers.
Is debt settlement a good idea? It depends entirely on your situation. For people who genuinely can’t pay their debts and want to avoid bankruptcy, it’s a legitimate option with significant trade-offs. For people who could pay with sacrifice, it trades credit damage for modest savings in a way that often isn’t worth it.
Before signing up with any debt settlement company, talk to a nonprofit credit counselor, they’ll help you understand all options and aren’t trying to sell you anything. The National Foundation for Credit Counseling can connect you with legitimate nonprofit agencies.
Debt relief options have legal and tax implications specific to your situation. This information is general and not financial or legal advice. Consult with qualified professionals before making decisions about debt relief.
