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Available across many Canadian provinces (excluding Quebec).
This helps us provide accurate estimates based on your local debt relief landscape.
Your information is private and secure
This calculator models a debt-settlement scenario: you enter your total unsecured debt, and the tool estimates a settlement range (typically 40–60% of the balance), program fees (15–25% of enrolled debt), and a monthly escrow payment. It then compares the total cost of settlement against continuing to pay your current debts at their existing rates.
Settlement assumes you stop paying creditors and instead deposit money into an escrow account. Once sufficient funds accumulate, the settlement company (or you, if negotiating independently) offers creditors a lump-sum payment that is less than the full balance. Creditors may accept because collecting something beats collecting nothing if you default.
The calculator includes estimated tax liability. Forgiven debt exceeding $600 is reported as income to the IRS on Form 1099-C. At a 22% marginal tax rate, a $10,000 forgiveness creates roughly $2,200 in additional tax. This cost is factored into the comparison so you see the true net savings of settlement versus full repayment.
Enrolling without exploring alternatives first. Settlement is one of the most disruptive debt solutions. Before enrolling, try credit counselling (free through NFCC), debt management plans, consolidation loans, and even DIY negotiation. Settlement should be a last resort before bankruptcy, not a first step.
Choosing a company based on advertising. Heavily advertised firms often have the highest fees and lowest settlement rates. Research complaints with your state attorney general, check CFPB and BBB reviews, and verify the company is a member of a trade association like IAPDA or AFCC. Never pay upfront fees—this is illegal in many states and always a red flag.
Not budgeting for the tax bill. A $20,000 debt settled for $10,000 means $10,000 of forgiven income. At a 22% rate, that is $2,200 in taxes due the following April. If you cannot pay this, you may qualify for the insolvency exclusion (IRS Form 982), but you must file it proactively. Forgetting this creates a surprise bill that can undo the financial relief settlement was supposed to provide.
Ignoring lawsuit risk. During the non-payment period (3–6+ months before settlements begin), creditors can and do sue. A judgment allows wage garnishment and bank levies. Settlement companies cannot guarantee creditors will negotiate instead of litigate. If you are sued, the settlement plan may collapse, leaving you with damaged credit, legal fees, and the same debt.
Example 1 — Moderate unsecured debt. Total debt: $18,000. Estimated settlement: 50% ($9,000). Program fees: 20% of enrolled debt ($3,600). Tax on forgiven $9,000 at 22%: $1,980. Total cost of settlement: roughly $14,580. Compared to paying $18,000 plus interest at 20% APR over 4 years ($22,500 total), settlement saves approximately $7,900. Credit damage lasts 7 years.
Example 2 — High debt, insolvency likely. Total debt: $45,000. Settlement at 45% ($20,250). Fees: 22% ($9,900). If insolvent (debts exceed assets), tax on forgiven amount may be excluded via Form 982—potential tax: $0. Total settlement cost: roughly $30,150 vs. $45,000+ with interest. Savings: approximately $15,000+. In this case, bankruptcy (Chapter 7 at $2,000–$3,500 in legal fees) may actually be cheaper and faster—consult an attorney.
Example 3 — Small debt, not worth it. Total debt: $6,000. Settlement at 55% ($3,300). Fees: 20% ($1,200). Tax: $594. Total: $5,094. Compared to paying $6,000 plus $1,200 interest over 2 years ($7,200), settlement saves only $2,100 while destroying credit for 7 years. For this amount, aggressive self-management ($350/month for 20 months) is almost always better.
Educational tool only — not financial advice. Examples use hypothetical numbers for illustration. Actual results depend on your specific balances, rates, and payment consistency. Consult a qualified financial professional for personalized guidance.