When you enroll in a debt forgiveness program, most debt relief companies will typically require you to make regular monthly payments into a special account, usually through a third-party escrow service. These funds are then used to negotiate settlements with your creditors. But if you stop making those payments, the company doesn’t have the funds needed to settle your debts. And that can trigger a domino effect of problems.
- Your account could be canceled: Most debt relief companies treat nonpayment as a default on the agreement. If you go too long without paying, they may remove you from the program entirely. That leaves your debts unresolved and you go right back where you started.
- Creditors could resume or escalate collection efforts: Some creditors may temporarily hold off on collections while negotiations are in progress. But once payments (and therefore the negotiations) stop, they may resume calling, sending letters — or worse. At that point, the threat of lawsuits, wage garnishment and aggressive collection activity are all back on the table.
- Any progress you’ve made could be lost: If your debt relief company was already negotiating or even had settlements in progress, those may fall through. Creditors might back out if they don’t receive payment on time, and you could lose hard-won progress on reducing what you owe.
- Your credit could take another hit: Enrolling in a debt relief program already affects your credit score, since it typically involves stopping payments to creditors during the negotiation phase. But failing to follow through or dropping out of the program entirely can make things worse, with prolonged delinquencies and potential charge-offs added to your credit report.
If you’re struggling to keep up with your payments to a debt relief company, there are steps you can take before things spiral out of control.
- Contact the debt relief company immediately
- Reassess your budget
- Consider alternatives
- Don’t ignore the program
“If you’re struggling to make payments, don’t ignore the program. Even if you’re frustrated or feel like the plan isn’t working, staying in communication gives you a better chance of protecting your progress and possibly finding a better solution.”
- Contact the debt relief company immediately
- Reassess your budget
- Consider alternatives
- Don’t ignore the program
Stopping payments to a debt relief company can undo all the progress you’ve made toward getting out of debt, and it can expose you to renewed collections, creditor lawsuits and further damage to your credit. But if you’re struggling, don’t panic. Talk to your provider, review your finances and explore your options. You may be able to adjust your plan or switch to a different form of debt help that better fits your current situation.
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