1. What is Debt Settlement?

Debt settlement is a negotiation process where a creditor agrees to accept less than the full amount owed as payment in full. This calculator helps estimate the final settled amount based on the principal debt and agreed settlement percentage.

2. How Does the Calculator Work?

The calculator uses the debt settlement formula:

Where:

• \( \text{Principal} \) — Original amount owed (in currency)
• \( \text{Settlement Percentage} \) — Agreed discount percentage (0-100%)

Explanation: The formula calculates the reduced amount you'll pay after applying the settlement percentage discount to the principal.

3. Importance of Settlement Calculation

Details: Understanding the settled amount helps in financial planning, negotiating with creditors, and assessing the true cost of debt resolution options.

4. Using the Calculator

Tips: Enter the principal amount in dollars and the settlement percentage (0-100). Both values must be valid (principal > 0, settlement between 0-100).

5. Frequently Asked Questions (FAQ)

Q1: Is debt settlement right for me?
A: Debt settlement can help resolve debts but may impact credit scores and have tax implications. Consult a financial advisor.

Q2: What's a typical settlement percentage?
A: Settlement percentages vary (often 30-60%) depending on debt type, age, and creditor policies.

Q3: Are there fees associated with settlement?
A: Some settlement companies charge fees (typically 15-25% of enrolled debt). These aren't included in this calculation.

Q4: How does settlement affect taxes?
A: Forgiven debt over $600 may be considered taxable income by the IRS (Form 1099-C).

Q5: Should I settle all my debts?
A: Consider each debt separately. Some creditors may be more willing to negotiate than others.