Part of what makes getting rid of debt so challenging is what works for one person may not work for another. Unfortunately, there’s no blanket approach to eliminating debt — especially if you’re currently carrying a few different kinds.

Before you decide to pursue debt settlement, you’ll have to figure out which of your debts are eligible for the program. 

Here’s more on what types of debt may be eligible for debt relief and why.

Secured vs. Unsecured Debt

The most straightforward way to describe eligibility for debt settlement is most unsecured debts can be enrolled, while most secured debts are not.

Unsecured debts are those not tied to a physical asset or otherwise backed by collateral. These types of loans are considered higher risk from the lender’s perspective because they may not be able to recover their investment if you default on them — which also explains why the interest rates tend to be higher on unsecured debts.

Two classic examples of unsecured debts eligible for debt settlement include credit card accounts and medical bills. For instance, here’s what Freedom Debt Relief says it could help enrollees with:

• Credit cards
• Medical bills
• Department store cards
• Other unsecured debts
• Private student loans (case-by-case basis)
• Business debts (case-by-case basis)

But this program also notes it cannot help enrollees with federal student loans, nor secured debts like auto loans and mortgages. 

With this knowledge, you can evaluate your debts to determine which are likely eligible for debt settlement. It’s also worth noting most debt settlement programs require a minimum amount of unsecured debt, often $7,500 or more.

What to Expect from Debt Settlement?

If you find you do have debts eligible for settlement, both in type and amount, you’re likely to what the process will entail.

Debt settlement centers around negotiating with creditors in an attempt to get them to lower the amount they’ll accept in exchange for a mutually agreed-upon repayment schedule — either in a single sum or installments. This is because creditors are at risk of never receiving repayment for unsecured debts, so they’re often eager to get at least a fraction of the original balance.

Enrolling in a program means a team of negotiators will handle these conversations with your creditors. While it is possible to attempt to contact your creditors and hash out these details on your own, many people find it helpful to have professionals in their corners working directly with creditors.

Your responsibility will be making monthly deposits into a special account you control until you have enough money to start that negotiation process. The exact amount you will be expected to deposit each month depends on factors like your income and how much debt you’re trying to settle. Because it does tend to take time to save up enough funds to settle, especially across multiple accounts, you can expect the settlement process to take at least 24 to 48 months — possibly even longer, depending on your exact situation.

Enrolling in a debt settlement program is one way to address unsecured debts like credit card balances, medical expenses and some private student loans. The ideal outcome is getting those accounts paid off for less than what you originally owed through a negotiation process. However, it’s important to note secured debts like mortgages and auto loans are not eligible for this settlement process.