By James Farias
Founder & CEO, Relief Strategies, LLC
If you’ve ever looked up debt settlement on Reddit, TikTok, or YouTube, you’ve probably come away more confused than when you started.
When I first started digging into the wave of content labeling debt settlement a scam, I expected to find the usual misinformation; people misunderstanding the process or venting about a negative experience. But what I found was more concerning. Many of these influencers and commenters were actually describing the process correctly: stop paying your creditors, make deposits into a program account, allow accounts to go delinquent, and eventually begin negotiations. They understood the steps, but not the strategy.
What they didn’t grasp was the bigger picture: the timing, the legal structure, and the purpose behind the process. Without that understanding, fear tends to fill in the blanks. People panic when their credit score drops. They worry when months pass with no settlements. They cancel the program just before results begin, and then share their story online, warning others that the entire thing was a scam.
So, how can something be described correctly, be incredibly effective for the majority of people who follow through, and still be called a scam?
That’s the disconnect we need to address.
What Debt Settlement Actually Is
Debt settlement is not a scam, it’s a legitimate, structured negotiation strategy. It’s not for everyone, and it’s not without risk. But when done properly, it can reduce your total debt and restore financial breathing room.
Here’s how it works: You stop making payments to your creditors and instead deposit money each month into a secure account. After your accounts have gone delinquent, usually after 90 to 180 days, the settlement company begins negotiating with your creditors. If successful, your debts are settled for less than what you owe.
Yes, your credit score will take a hit.
Yes, the first few months can be stressful.
And yes, there are fees involved, though these are usually built into the final savings structure and only collected after successful settlements.
But none of that makes it a scam. It makes it a tool. And like any financial tool, it needs to be used correctly, with full awareness of the tradeoffs.
What Social Media Gets Right… and What It Misses
In fairness, a lot of the information online is technically accurate. Many posts and videos mention that you’ll have to stop making payments, that your credit will decline, that the process takes time, and that fees are involved. All of that is true.
What’s missing, however, is context.
Most people online aren’t talking about why the process is structured that way, or what the actual goals are. Few mention that your debt-to-income ratio and utilization may already be disqualifying you for credit, regardless of your score. Fewer still explain that settlements typically don’t begin until several months in, or that most people who complete the program experience significant savings and long-term improvement in their financial stability.
They also rarely mention the alternatives, like bankruptcy, which often carry equal or greater consequences.
So Why Do People Still Call It a Scam?
Because fear is louder than facts.
By the time someone reaches the midpoint of a settlement program, they’ve often watched their credit score fall, received collection calls, and seen little to no movement in their balances. If they don’t understand the timeline or the process behind the scenes, it’s easy to assume the worst.
What makes this even harder is that during those first few months, clients are making regular deposits into their program account, but they haven’t seen any settlements yet. Because negotiations typically don’t begin until accounts are 90 to 180 days delinquent, there’s a natural pause before results show up. On the surface, it looks like nothing is happening. Their credit score drops, they get calls from creditors, and they start to wonder if they’re just paying fees, even though no fees are charged until a debt is actually settled. That perception alone creates doubt. So they search online, find a post calling the process a scam, and cancel right before the actual settlements begin.
This is when many people cancel, just before negotiations begin.
Then they go online and tell others to avoid it at all costs. The problem? The strategy didn’t fail, they just didn’t finish.
A Better Way to Think About It
Debt settlement isn’t about fixing your credit score. It’s about fixing your financial reality.
It’s designed to help people who are underwater reduce their total debt, restore positive cash flow, and avoid bankruptcy. It’s not for everyone. For some, direct negotiations, consolidation, or credit counseling may be a better fit. But for those with significant unsecured debt and limited repayment options, settlement can be a powerful solution.
It’s time to stop calling it a scam just because we don’t fully understand it.
Final Thoughts
If you’re struggling with debt and trying to figure out your next move, don’t rely on social media noise. Ask questions. Look at your full financial picture. Understand the tradeoffs of each option, including debt settlement, and make an informed decision that’s right for you.
Want personalized help navigating your student loans or overall debt relief strategy?
Contact Relief Strategies for a free consultation and take the first step toward clarity and control.
Best regards,
James Farias
CEO of Relief Strategies, LLC
About the Author
James Farias is the CEO of Relief Strategies, LLC, a leading firm dedicated to helping individuals achieve financial freedom through effective debt relief solutions. With over 30 years of business management experience and a passion for empowering others, James has guided countless clients through their journey to reduce debt and regain control of their finances.
Recognizing how quickly debt can overwhelm even the most financially disciplined individuals, James focuses on strategies that reduce monthly payments, minimize financial stress, and unlock new opportunities. His mission is to help clients move past financial challenges and embrace a brighter future.
Connect with James on LinkedIn or visit Relief Strategies to learn more about how he and his team can assist you on your journey to financial freedom.
