Rex says
Money math without the spreadsheet headache. Plug in your numbers and I'll show you exactly where the dollars land.
Try a scenario
Click to load — tweak from there.Inputs
Result
Net saving vs paying it off
$14,698
All-in cost of settling
$16,600
Total cost of paying it off
$31,298
Settlement company fee
$4,400
Tax on forgiven debt
$2,200
Monthly payment if you repay instead
$652
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How to use this
- 1Enter enrolled debt balance ($).
- 2Enter expected settlement (% of balance).
- 3Enter settlement company fee (% of enrolled debt).
- 4Enter marginal income tax rate (%).
- 5Enter current card apr (for payoff comparison) (%).
- 6Enter months to pay off instead (months).
- 7Read your net saving vs paying it off on the right — it updates as you type.
- 8Hit Share to keep the scenario or send it to someone.
About this calculator
Debt settlement companies advertise the headline discount — 'settle for 50 cents on the dollar' — and quietly leave out three costs that eat most of the gain: the settlement company's fee (commonly 15-25% of enrolled debt), income tax on forgiven balances over $600 reported on a 1099-C, and the months of missed payments the program requires before creditors negotiate. This calculator nets all three against the discount so you can see the real saving versus simply paying the balance down. Enter your enrolled balance, the settlement percentage you expect, the program fee, and your marginal tax rate. The result shows total out-of-pocket under settlement, total under straight repayment, and the true difference. Use it before signing anything: for many balances under roughly $10,000 the net saving is small enough that a hardship plan directly with the creditor, or a nonprofit credit counseling debt management plan, comes out ahead once the credit-score damage is priced in.
Worked example
Using the values the calculator loads with:
Inputs
- Enrolled debt balance: 20000 $
- Expected settlement: 50 % of balance
- Settlement company fee: 22 % of enrolled debt
- Marginal income tax rate: 22 %
- Current card APR (for payoff comparison): 24 %
- Months to pay off instead: 48 months
Results
- Net saving vs paying it off: $14,698
- All-in cost of settling: $16,600
- Total cost of paying it off: $31,298
- Settlement company fee: $4,400
- Tax on forgiven debt: $2,200
- Monthly payment if you repay instead: $652
What each field means
Inputs
- Enrolled debt balance ($)
- The enrolled debt balance used in the calculation, measured in $. Starts at 20000 $ so you have a working example on load. Accepted range: 500–500000 $.
- Expected settlement (% of balance)
- The expected settlement used in the calculation, measured in % of balance. Starts at 50 % of balance so you have a working example on load. Accepted range: 20–90 % of balance.
- Settlement company fee (% of enrolled debt)
- The settlement company fee used in the calculation, measured in % of enrolled debt. Starts at 22 % of enrolled debt so you have a working example on load. Accepted range: 0–30 % of enrolled debt.
- Marginal income tax rate (%)
- The marginal income tax rate used in the calculation, measured in %. Starts at 22 % so you have a working example on load. Accepted range: 0–50 %.
- Current card APR (for payoff comparison) (%)
- The current card apr (for payoff comparison) used in the calculation, measured in %. Starts at 24 % so you have a working example on load. Accepted range: 0–36 %.
- Months to pay off instead (months)
- The months to pay off instead used in the calculation, measured in months. Starts at 48 months so you have a working example on load. Accepted range: 6–120 months.
Results
- Net saving vs paying it off
- Returned as a money amount in US dollars and shown as the headline result. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- All-in cost of settling
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Total cost of paying it off
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Settlement company fee
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Tax on forgiven debt
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Monthly payment if you repay instead
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
FAQ
Is forgiven debt really taxable?
Usually yes. Creditors file Form 1099-C for cancelled debt of $600 or more, and the IRS treats it as ordinary income unless you were insolvent at the time of settlement or the debt was discharged in bankruptcy. This tool assumes the taxable case; check IRS Form 982 if you think the insolvency exclusion applies to you.
Does settlement hurt my credit score?
Yes, materially. Programs typically require you to stop paying creditors for months while funds accumulate, so you accrue late marks, and settled accounts are reported as 'settled for less than full balance' for seven years. This calculator prices the cash, not that damage.
When does settlement clearly win?
Large balances you genuinely cannot service, where the alternative repayment period stretches past five years at a high APR. On small balances the fixed fee and tax bill often erase the discount.
What's the alternative?
A nonprofit credit counseling debt management plan usually cuts APR rather than principal, keeps accounts current, and charges far less than 20% of your balance. Compare both before enrolling.
Accuracy and limitations
- Results are estimates before tax, fees, and inflation unless an input explicitly covers them.
- Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.
- This is educational maths, not financial advice. Check anything contractual with the lender or your accountant.
Related tools
Cite this calculator
Writing about this topic? Grab a citation — every link helps keep these tools free.
RevenueLab. (2026). Debt Settlement Savings Calculator. Retrieved from https://www.revenuelab.fyi/toolbox/debt-settlement-savings-calculator
<p>Source: <a href="https://www.revenuelab.fyi/toolbox/debt-settlement-savings-calculator" target="_blank" rel="noopener">Debt Settlement Savings Calculator — RevenueLab</a> (2026).</p>
Source: [Debt Settlement Savings Calculator — RevenueLab](https://www.revenuelab.fyi/toolbox/debt-settlement-savings-calculator) (2026).