Debt Settlement Cost Calculator: What Settlement Costs After Fees, Tax and Time
Key takeaways
- The real cost of settlement is the amounts paid to creditors, plus the company's fee, plus any tax on forgiven debt, plus what happens to your credit while you save.
- If the sale is covered by the FTC's Telemarketing Sales Rule (it covers debt relief sold by phone, including calls you make in response to an ad), a fee cannot be collected until a debt is settled and you have made a payment under that settlement. The fee is either proportional to the enrolled debt or a fixed percentage of the amount saved.
- The IRS treats canceled debt as taxable in general, with exclusions such as bankruptcy and insolvency.
- No calculator can tell you what a creditor will accept. Every settlement figure on this page is an input, not a prediction.
A reduction figure on its own leaves out the fee, the tax and the time. This tool puts those costs next to it so you can judge the whole trade.
Before you price settlement, look at the other routes first. The CFPB suggests considering a nonprofit credit counselor, who may be able to set up a debt management plan, negotiating directly with your creditors yourself, and talking to a bankruptcy attorney about your options under the law. The debt relief hub compares them.
Estimate what settlement costs
Every settlement figure here is an input, not a prediction: no calculator can tell you what a creditor will accept. Use the figures from the company's written disclosures. Results update as you type. This calculator runs in your browser and does not send the numbers you enter.
Fees and interest usually raise the balance while you save. Leave blank to use the enrolled balance.
Enter the figure from an actual offer or the company's disclosure. This is not a prediction.
From your contract. One percent for every debt: under the FTC rule, "the percentage charged cannot change from one individual debt to another."
Enter any account charges in your contract.
What you would put into the dedicated account each month.
Your state's rate on ordinary income, if any.
For the insolvency estimate. Leave both blank to skip it.
Fair market value of everything you own.
Your estimate
This calculator needs JavaScript. The formulas and the worked example on this page show the same math.
- Tax on forgiven debt: Form 1099-C and canceled debt taxes
- Fee rules in full: Debt settlement fees and the FTC rule
- Other routes: debt relief options
How this is calculated
- Amount paid on each debt: the settlement amount you enter, or the percent you enter times the balance at settlement, rounded to the cent, half up. A blank balance at settlement means the balance at enrollment.
- Saved on each debt = balance at enrollment minus amount paid, because the FTC rule measures savings from the balance when the debt was enrolled. Forgiven on each debt = balance at settlement minus amount paid.
- Company fee on each debt: with a fee on the amount saved, fee percent × amount saved, and $0 on a debt where nothing was saved; with a fee on the enrolled debt, fee percent × balance at enrollment. Each fee is rounded to the cent, half up, and the fees are added up.
- Tax estimate: if you enter total liabilities and total assets, you are insolvent by the amount liabilities are above assets, and $0 otherwise. Taxable = total forgiven minus that amount, never below $0. Estimated tax = taxable × (federal rate + state rate), rounded to the cent, half up.
- Months to fund = (total paid to creditors + total company fees) ÷ (monthly deposit minus other monthly charges), rounded up to a whole month. Other program charges = the monthly charge × those months. With a $0 deposit, or charges that use up the whole deposit, no timeline is shown, and other program charges are counted as $0.
- Total cost = total paid to creditors + total company fees + other program charges + estimated tax. The tax is due when you file, not paid from the account, so it is not in the months to fund.
Example: three cards enrolled at $10,000, $6,000 and $4,000 ($20,000), grown to $11,000, $6,600 and $4,400 by settlement, each settled for half of the balance at settlement, a fee of 25% of the amount saved, a 22% federal rate, liabilities of $40,000 and assets of $34,000, and $400 a month into the account.
| Paid to creditors | $11,000.00 |
|---|---|
| Saved against enrollment | $9,000.00 |
| Company fee (25% of the amount saved) | $2,250.00 |
| Forgiven debt | $11,000.00 |
| Taxable after insolvency of $6,000.00 | $5,000.00 |
| Estimated tax at 22% | $1,100.00 |
| Months to fund at $400.00 a month | 34 |
| Estimated total cost | $14,350.00 |
Every settlement figure is one you enter. The estimate does not predict what a creditor will accept. It does not work out late fees or interest for you; enter them through the balance at settlement. It leaves out collection costs and any lawsuit while you save.
What does debt settlement actually cost?
Four parts, three of them in dollars:
| Cost | Where it comes from | Can the tool calculate it? |
|---|---|---|
| Amounts paid to creditors | Each creditor's settlement agreement | Only from what you enter |
| Settlement company fee | Your contract, within the limits of 16 CFR 310.4(a)(5) | Yes, from your contract's fee basis and percent |
| Tax on forgiven debt | IRS rules on canceled debt | An estimate, from your tax rate and insolvency figures |
| Credit damage, collections, lawsuits, added fees and interest | Missed payments while you save | No. Shown as a warning, never as a number |
For a worked example using one company's published fee range, see National Debt Relief fees.
The CFPB warns that settlement companies "often charge expensive fees," that "if you stop paying your bills, you will usually incur late fees, penalty interest and other charges," and that "in many cases, the debt settlement company will be unable to settle all of your debts." The calculator is built so those facts stay on screen next to the result.
What does the FTC rule say about settlement fees?
This is the rule the fee calculation must follow, quoted from 16 CFR 310.4(a)(5)(i). A seller or telemarketer may not request or receive payment of any fee for a debt relief service until and unless:
The rule, quoted. "(A) The seller or telemarketer has renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a settlement agreement, debt management plan, or other such valid contractual agreement executed by the customer; (B) The customer has made at least one payment pursuant to that settlement agreement, debt management plan, or other valid contractual agreement between the customer and the creditor or debt collector; and (C) To the extent that debts enrolled in a service are renegotiated, settled, reduced, or otherwise altered individually, the fee or consideration either: (1) Bears the same proportional relationship to the total fee for renegotiating, settling, reducing, or altering the terms of the entire debt balance as the individual debt amount bears to the entire debt amount. The individual debt amount and the entire debt amount are those owed at the time the debt was enrolled in the service; or (2) Is a percentage of the amount saved as a result of the renegotiation, settlement, reduction, or alteration. The percentage charged cannot change from one individual debt to another. The amount saved is the difference between the amount owed at the time the debt was enrolled in the service and the amount actually paid to satisfy the debt."
If the company has you save in a dedicated account, 16 CFR 310.4(a)(5)(ii) requires that the funds be held "at an insured financial institution," that "the customer owns the funds held in the account and is paid accrued interest on the account, if any," that the administrator "is not owned or controlled by, or in any way affiliated with, the debt relief service," and that "the customer may withdraw from the debt relief service at any time without penalty, and must receive all funds in the account, other than funds earned by the debt relief service in compliance with § 310.4(a)(5)(i)(A) through (C), within seven (7) business days of the customer's request."
Before you enroll, if the sale is covered by the FTC's Telemarketing Sales Rule (it covers debt relief sold by phone, including calls you make in response to an ad), 16 CFR 310.3(a)(1)(viii) requires the company to disclose "the amount of time necessary to achieve the represented results," the amount or percentage of each debt "that the customer must accumulate before the debt relief service provider will make a bona fide settlement offer," and, where the service relies on missed payments, that it "will likely adversely affect the customer's creditworthiness, may result in the customer being subject to collections or sued by creditors or debt collectors, and may increase the amount of money the customer owes due to the accrual of fees and interest."
The calculator takes those disclosed figures as inputs. Our full guide is debt settlement fees and the FTC rule.
How does the calculator compute the cost?
for each debt i:
paid_i = settlement amount entered
saved_i = enrolled_i − paid_i (310.4(a)(5)(i)(C)(2) definition)
forgiven_i = balance_at_settlement_i − paid_i (estimate of canceled debt)
fee_i = fee% × saved_i (savings basis)
or fee% × enrolled_i (enrolled-debt basis, proportional per (C)(1))
insolvency = max(0, liabilities − assets) (IRS Pub. 4681 definition)
taxable = max(0, Σ forgiven_i − insolvency)
tax_estimate = taxable × (federal marginal rate + state rate, if entered)
net_monthly = monthly deposit − other charges per month
months_to_fund = ceil((Σ paid_i + Σ fee_i) / net_monthly) (no timeline if net_monthly is $0 or less)
charges_total = other charges per month × months_to_fund (if there is no timeline, charges_total is $0)
total_cost = Σ paid_i + Σ fee_i + charges_total + tax_estimateThe calculator uses one insolvency figure for all debts. If your debts settle on different dates, your insolvency can differ for each settlement; work each one out with the Publication 4681 worksheet.
IRS Publication 4681 says you were insolvent "to the extent that the total of all of your liabilities was more than the FMV of all of your assets immediately before the cancellation." IRS Topic 431 lists insolvency and Title 11 bankruptcy among the exclusions and says the excluded amount is reported on Form 982. The tool's tax figure is an estimate only and links to our Form 1099-C guide.
Banks, credit unions, card issuers and other lenders covered by the IRS rule file Form 1099-C for "a debt owed to you of $600 or more." The calculator flags each debt whose forgiven amount reaches $600, and notes that forgiven amounts can be taxable whether or not a form arrives.
Worked example, recomputed
These inputs are illustrative. They are not typical results, not a fee recommendation and not a prediction of what any creditor would accept.
Three cards enrolled: Card A $10,000, Card B $6,000, Card C $4,000, so $20,000 enrolled. While you save, balances grow to $11,000, $6,600 and $4,400 ($22,000). Each settles for half of the balance at settlement: $5,500, $3,300 and $2,200, so $11,000 paid to creditors.
| Debt | Enrolled | At settlement | Paid | Saved (vs enrollment) | Forgiven | Fee: 25% of saved | Fee: 20% of enrolled |
|---|---|---|---|---|---|---|---|
| Card A | $10,000 | $11,000 | $5,500 | $4,500 | $5,500 | $1,125 | $2,000 |
| Card B | $6,000 | $6,600 | $3,300 | $2,700 | $3,300 | $675 | $1,200 |
| Card C | $4,000 | $4,400 | $2,200 | $1,800 | $2,200 | $450 | $800 |
| Total | $20,000 | $22,000 | $11,000 | $9,000 | $11,000 | $2,250 | $4,000 |
Notice that "saved" is measured from the enrollment balance, as the rule defines it, so the $2,000 of growth while you saved is not counted as savings. Forgiven debt, the figure that matters for tax, is measured from the balance actually owed at settlement: $11,000.
Tax at a 22% marginal rate:
- Not insolvent: 11,000 × 0.22 = $2,420.00.
- Liabilities $40,000 and assets $34,000 before cancellation: insolvent by $6,000, so taxable = 11,000 − 6,000 = $5,000, and tax = $1,100.00.
Totals:
| Fee basis | Tax case | Paid | Fee | Tax | Total cost | Months to fund at $400 |
|---|---|---|---|---|---|---|
| 25% of saved | Insolvent by $6,000 | $11,000 | $2,250 | $1,100 | $14,350 | 34 |
| 25% of saved | Not insolvent | $11,000 | $2,250 | $2,420 | $15,670 | 34 |
| 20% of enrolled | Insolvent by $6,000 | $11,000 | $4,000 | $1,100 | $16,100 | 38 |
| 20% of enrolled | Not insolvent | $11,000 | $4,000 | $2,420 | $17,420 | 38 |
Months to fund: (11,000 + 2,250) ÷ 400 = 33.1, rounded up to 34; (11,000 + 4,000) ÷ 400 = 37.5, rounded up to 38. Tax is due at filing, not from the account, so it is excluded from the funding months.
How should the result compare settlement with paying in full?
The comparison line shows the enrolled balance as the floor of paying in full ("at least $20,000, plus interest under your current terms") and the settlement total next to it. It does not print a "you save" figure. In the worked example, the settlement total is below the $20,000 enrolled balance. Those figures are illustrative inputs, not typical results, and they leave out credit damage, collection costs and lawsuits, which the CFPB and the rule's required disclosures both describe. A reader who still has income for payments may also want to read debt settlement vs bankruptcy and the month-by-month view in how debt settlement works.
Results are not promised: the CFPB tells consumers to avoid any company that "represents that it can settle all of your debt for a promised percentage reduction" or "guarantees it can make your debt go away." If a company's quote looks like this calculator's output with the warnings removed, read the contract against the FTC rule above before signing.
Who this is for
You are comparing a settlement program's pitch against paying your debts in full, and you want fees, tax and time on one screen before you sign.
What to do next
- Get the company's written disclosures: time to results, amount to accumulate before each offer, fee basis and percent.
- Enter them here with realistic balance growth.
- Ask a tax professional about insolvency if your liabilities exceed your assets.
- Compare the total and the timeline with the other relief options in the debt relief hub.
Loans Generator is paid by National Debt Relief, a debt settlement company, when a reader we refer enrolls in its program. This does not change what we report.
Common questions
How much does debt settlement cost in fees?
The FTC rule does not set a percentage. It controls when a fee can be charged and how it is calculated: proportional to the enrolled debt, or a fixed percentage of the amount saved. Your contract sets the percent.
Can a settlement company charge me before settling a debt?
Not if the Telemarketing Sales Rule covers the sale. The fee cannot be requested or received until at least one debt is settled under an agreement you executed and you have made at least one payment under it.
Is forgiven debt taxable?
In general, yes, per IRS Topic 431. Exclusions include debt canceled in a Title 11 bankruptcy case and debt canceled to the extent you were insolvent, reported on Form 982.
Why does the calculator ask for the balance at settlement?
Because the CFPB warns that late fees and interest are added while you stop paying. The forgiven amount, and so the possible tax, is based on what you owe when the debt settles.
Can I quit a settlement program and get my money back?
Under 16 CFR 310.4(a)(5)(ii)(E), you may withdraw at any time without penalty and must receive the account funds, other than fees already earned under the rule, within seven business days of your request.
How we researched this
We read 16 CFR 310.3 and 310.4 on eCFR, the CFPB's debt relief page, IRS Topic 431, IRS Publication 4681 and the IRS instructions for Forms 1099-A and 1099-C on October 28, 2026. The worked example was computed with the formulas on this page.
Related: Debt settlement fees and the FTC rule · Form 1099-C and canceled debt taxes · Debt settlement vs bankruptcy · Next step: debt relief options
Sources
- 16 CFR 310.4, Telemarketing Sales Rule, via eCFR, accessed October 28, 2026.
- 16 CFR 310.3, Telemarketing Sales Rule, via eCFR, accessed October 28, 2026.
- Consumer Financial Protection Bureau, "What is a debt relief program and how do I know if I should use one?", accessed October 28, 2026.
- Internal Revenue Service, "Topic no. 431, Canceled debt - Is it taxable or not?", accessed October 28, 2026.
- Internal Revenue Service, Publication 4681 (2025), accessed October 28, 2026.
- Internal Revenue Service, "Instructions for Forms 1099-A and 1099-C (04/2025)", accessed October 28, 2026.
- eCFR (Federal Trade Commission), “16 CFR 310.4, Abusive telemarketing acts or practices (Telemarketing Sales Rule)”
- eCFR (Federal Trade Commission), “16 CFR 310.3, Deceptive telemarketing acts or practices (Telemarketing Sales Rule)”
- Internal Revenue Service, “Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments”
Disclosure: Loans Generator is paid by National Debt Relief, a debt settlement company, when a reader we refer enrolls in its program. That is why this page quotes the federal rule and federal agencies directly. Judge any company, including the ones we work with, against those sources. Results of any debt relief program are not guaranteed; programs that rely on missed payments can damage your credit and lead to collection suits, and forgiven debt may be taxable.
This page is general information, not legal, tax, or financial advice. Debt relief licensing rules vary by state. Consult a tax professional about the treatment of forgiven debt.