Millennial couple cuts $50k debt using this 5-step debt settlement strategy

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Terrance and Michelle, a couple in Phoenix, owed $12,000 on an old medical bill, $6,100 on an old credit card, $32,000 on an old private student loan for a total debt of $50,100 in collections.  They were able to settle all of this debt for just $21,000 — to become debt-free.  

I want to show you how you can settle your debt, just like them, in five simple steps. 

The Lord knows we make mistakes, and while there are consequences for disobeying God, God always grants us mercy.  Debt is no exception.  

In Deuteronomy Chapter 15, Moses tells the people of Israel that all debts must be forgiven after seven years. The purpose of this commandment was to encourage the people of Isreal to show mercy on their fellow man, and allow them to live a prosperous life. 

The command goes a little further.  Moses tells the people of Isreal to not only forgive debts but to also help those that may need assistance getting back on their feet.  This is one of the clearest Biblical examples of what it’s like to love your neighbor. 

Debt is typically not the problem.  It is only a symptom of the actual problem. 

People will find themselves with debt in collections primarily for one of two reasons… 

  1. They have an expensive unexpected life change that happens too quickly to prepare for. 
  2. They have no control over how they’re managing their money. 

If you know you’re in the second category, you can visit my company at  We can help you learn how to better manage your money and get on the right track.  

Terrance and Michelle were in the first category.  They had an expensive unexpected life change that happened too quickly for them to prepare for. 

Terrance lost his job.  Six weeks later, Michelle suffered a rare skin disorder, causing the family to rack up medical bills.  Terrance had to balance caring for his wife, taking care of their two kids, while also trying to find a job.  This caused them to fall behind on the bills. 

One year later, Michelle was much better and Terrance was back working. They had never been behind on their bills and we’re ready to get back on their feet.  Here are the steps they took to become debt-free and settle their debts for almost $30,000 less than they owed. 

1. Get Verification of Debt

The first thing Terrance and Michelle did was get verification of the debt. They had to make sure the debt was not passed the statute of limitations — this is what’s known as zombie debt.  

According to Forbes, zombie debt is an old debt that legally is beyond the date collection companies can collect on the debt.  You don’t want to reactivate an old debt and cause it to pop back up on your credit report. Do not start any negotiations until you receive a debt verification letter, verifying the debt is not a zombie debt. 

2. Save Money

Next, Terrence and Michelle had to save money.  It goes without saying, but you should have a cash flow plan.  This ensures you have control over your money before you try to negotiate the debt.  If you don’t have control over your money, chances are you will end up right where you are right now, so make sure you have a cash flow plan. 

The first part of your savings should be a credit card savings.  If you run into an emergency, you don’t have to resort back to using credit cards, if this savings account is in place.  The credit card savings should be equal to anywhere between one to three months of expenses. Before you start negotiating, make sure you have at least one month of savings put away. 

The next savings you want to have in place is at least 25% of your total outstanding debt amount.  This will allow you to pay a lump sum on the negotiated amount, giving you a better chance of settling with these companies. 

3. Send Request to Settle

Alright, so, you verify the debt, you have your savings in place.  Now, the third step is to send a request to settle the debt — in writing. 

Remember, don’t try to make a settlement until you have your 25% saved. 

Be honest with the creditor about your situation.  Explain why you fell behind, and request that they settle for 25% of what you owe.  The creditors DO NOT have to agree to your request, but most of the time they will — if you do this the right way. 

4. Get Settlement Agreement in Writing

You’ve sent your request in writing, and it has been accepted. The creditor called you to tell you the offer is accepted.  The fourth part of this process is to receive a debt settlement agreement in writing. 

If the offer gets accepted over the phone, be sure to send the agreement in writing and get confirmation of the agreement with the associated invoice.  You want to make sure, as part of the agreement, the creditor notes that the account was “paid as agreed”, not “settled.” 

This is important for your credit report.  It will hurt your credit in a major way if they note that the debt was settled, instead of paid as agreed.  

5. Send Certified Cashier’s Check

Now, you have the money saved, you have your agreement accepted, you have it all in writing, it’s time to send a certified cashier’s check.   

DO NOT make a single payment until you have the agreement in writing.  After that’s done, you send a certified check. This requires a signature to make sure the check was actually received.  

You don’t want to give any bank information and no debit card information.  You don’t want to allow access to your bank account. You just want to pay what you agreed to by issuing a certified check. 

It’s very important that I tell you this, you may owe taxes on the debt that is settled.  The settled debt amount must be reported to the IRS, but understand, at the end of the day, you’re still saving a lot of money going this route. 

Those are the same five steps that I shared with Terrance and Michelle that allowed them to settle their debt for half of what they owed.   

This Will Motivate and Inspire You to Pay Off Debt

If you want to stay inspired, you want to stay motivated, download my free devotional “Done With Debt.”  It includes 28 Bible verses, specifically designed to help you stay motivated and help you get out of debt. 

Here is a link to the devotional:

Let Me Help You Develop Your Debt Elimination Planning Service

If you want some help to make sure you’re doing everything the right way.  Let my firm help you get out of debt.   

My debt elimination planning service will help you develop a cash flow plan, settle your debts, consolidate your debts, reduce your interest rates, and develop a step-by-step debt elimination plan.  You can visit to learn more about our debt elimination planning service. 

If you know someone that needs to hear this, please share this post with them, and together, we may be a blessing to someone else. 

Thank you for taking the time to check out this post. May God bless you on your financial journey. 

If this information blessed you, I asked that you please share by clicking one of the buttons below.  Together we can be a blessing to someone else.

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