How to Cancel a Debt Settlement Program and What to Expect

How to cancel a debt settlement program

Send a written cancellation request to your debt settlement company by email or mail. Keep a copy with the date you sent it. A verbal cancellation on a retention call can get lost or disputed later. A written request creates the record.

Next, stop the auto-draft to your dedicated account by contacting your bank directly. Notify your bank at least three business days before the next scheduled transfer. You can give the notice in person, by phone, or in writing. If you call, your bank may require that you follow up with written confirmation within 14 days. An oral order might expire after that without the written follow-up. 

Then write down both dates: when you sent the request to the company, and when you contacted the bank. If anything goes sideways, those two dates are your paper trail.

Some agreements may include additional cancellation terms, penalties, or fees that fall outside the federal dedicated-account return rule. For example, you might not get a refund of the monthly maintenance fee the bank charges for the account if you close it after the fee hits. Your specific contract governs these terms. Read your enrollment agreement, or ask your debt settlement company to walk you through it.

What happens after you cancel your debt settlement program

Your dedicated-account funds should come back within about a week. Under federal rules, the provider must return the money in the account within seven business days. The provider can subtract any fees it has already earned. The rest of the money in that account is yours, including any interest that accrued while it sat there.

Any debt the company already negotiated stays resolved as long as you fulfill your agreement. If you agreed to a payment plan, you have to keep paying, and you’ll have to manage the account and the payments yourself. If you paid the debt settlement company its fee for settling the account but you’re still making payments toward the agreement, you generally don’t get a refund, even partial, of the fee you paid. Your specific contract governs the terms of completed settlements.

Debts that have not been settled remain unchanged, with whatever interest and fees have accumulated. The Consumer Finance Protection Bureau notes built-up fees on unsettled debts may wipe out the savings on the ones that did settle. The bill may have grown while you were in the program.

When you cancel your debt settlement program, creditors may reach out to you on the debts that remain unsettled. That includes calls, letters, and the possibility of a lawsuit. Creditors could file a lawsuit during or after enrollment, and canceling does not change that risk.

Bills Action Plan

Step 1. Send your cancellation request in writing today. Email or mail it to your debt settlement company and keep a copy with the date you sent it. If you already called and got retention pushback, the written request creates the record that a phone call does not.

Step 2. Contact your bank to stop the next auto-draft. Do this separately from the company cancellation, and at least three business days before the next scheduled deposit. If your bank takes the request by phone, ask whether they need written confirmation. Get a confirmation or reference number either way.

Step 3. Read your enrollment agreement before you finalize. Look for the sections on cancellation and on fees. If anything is unclear, ask your debt settlement company to walk you through it.

Key Terms

Dedicated savings account. An account at an insured financial institution (typically a bank or credit union). Your monthly deposits sit there while the debt settlement company negotiates with creditors. You own the funds. Fees come out only after the company actually settles a debt and you agree to the terms of the settlement. 

Preauthorized electronic transfer. A recurring withdrawal you authorized in advance, such as the monthly draft to your dedicated account. Federal rules let you stop a preauthorized electronic transfer by notifying your bank at least three business days before the scheduled transfer.

Consumer Financial Protection Bureau (CFPB). A federal agency that oversees how banks, lenders, and other financial companies treat consumers.

This article is for general education. It is not legal or financial advice. Consult a qualified professional for advice specific to your situation.