Freedom Debt Relief Review 2023

By NerdWallet 
Edited by Kathy Hinson

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Freedom Debt Relief, a debt settlement services provider, negotiates with creditors to reduce the amount of unsecured debt you owe.

Debt settlement is one of several debt relief options consumers have. You'll want to consider whether you might qualify for another debt solution and compare fees. Also, think about whether Chapter 7 bankruptcy might wipe out more of your debt, more quickly.

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In this article:

How Freedom Debt Relief Works

How to qualify

Freedom works with customers who have debt from credit cards, medical bills, personal loans, private student loans and other types of unsecured debt. Generally, you must have a minimum total debt balance of $7,500 to qualify, but some states have laws setting higher minimums.

Like other debt relief companies, Freedom cannot help clients with debt that involves collateral, such as a mortgage or car loan. It also cannot address debt from federal student loans.

A typical new client has an average of $23,000 in unsecured debt across eight to nine credit accounts when they enroll with Freedom, says Sean Fox, the company’s co-president. The amount of unsecured debt can range as high as $100,000 or more, with some clients having 20 or more credit accounts, Fox adds.

The debt settlement process

Go online or call to do an assessment of your debts and suitability for the program with a Freedom representative. You'll then have a program summary call that details the settlement program, and be given an agreement and disclosures to sign. That's followed by an onboarding call.

Once you enroll debts in the program, you stop making payments on enrolled accounts. Instead, you open a dedicated account to hold payments for creditors. You’ll own and control the account and deposit monthly payments into it. Freedom works with you to determine the amount to be deposited each month into the account. The amount is based on your ability to pay and the amount of total enrolled debt, according to the company.

Whenever you stop paying a creditor, you become delinquent on that account. You accrue late fees and interest charges, and your credit score will drop. Delinquent accounts stay on your credit reports for seven years.

As money accrues in the dedicated account, Freedom begins negotiating with individual creditors on your behalf in an effort to get them to accept less than the amount you owe. The idea is that after months of nonpayment, the creditor will be motivated to take the lower sum rather than risk getting nothing at all.

If a creditor accepts the lower payoff amount, you pay the creditor, either a lump sum or in installments, from your dedicated account. You also then pay a fee to Freedom Debt Relief for its service.


By law, Freedom cannot charge upfront fees; rather, it collects a fee each time a settlement has been reached with a creditor and you have approved it and made at least one payment on it.

The fee ranges from 15% to 25%; it's based on the amount of the enrolled debt and may vary depending on state regulations. A customer who settles a $5,000 credit card balance for $3,000, for example, would pay between $750 and $1,250 to Freedom for its service.

There’s also a one-time fee of $9.95 to set up the special-purpose account, and a monthly fee of $9.95 that covers account servicing, Fox says. Those fees are levied by the company hosting that account, not by Freedom.  

Time frame

Freedom says most customers receive their first settlement within three months, but it can take longer depending on how much you save each month, the number of accounts enrolled in the program, and the amount owed on each account. Freedom says clients who commit to on-time monthly payments into their dedicated accounts resolve all of their enrolled debt within two to four years, on average.

Freedom Debt Relief at a glance

What to know about Freedom Debt Relief

Responsive to customer complaints

Freedom has an A+ rating at the Better Business Bureau. It has received more than 350 customer complaints in the past three years, including reports about problems with its service and issues with billing and collection. Notably, the company has a 100% response rate to customer complaints through the BBB.


In 2017, the company was sued by the Consumer Financial Protection Bureau, which alleged the company charged people without settling their debts as promised, made people negotiate their own settlements and misled consumers about its fees.

In July 2019, Freedom settled the CFPB lawsuit by agreeing to pay $20 million in restitution to affected consumers and a $5 million civil penalty


Risks of debt settlement

The risks and drawbacks associated with debt settlement include:

It hurts your credit

Since you’re required to stop making payments on outstanding debts to enter into a debt settlement program, those accounts will be marked delinquent on your credit reports. Your credit scores will take a significant hit, potentially affecting future applications for credit and even employment. Accounts that are delinquent stay on your credit reports for seven years, as do accounts charged off by lenders.

Success isn’t guaranteed

Some creditors may sell your debt to a third-party collection agency or debt buyer. Freedom says it deals with the third party and may coach some clients to settle directly with creditors, but results can vary.

Interest and fees accumulate

Over the period in which you’re enrolled in a debt settlement program, you’ll accrue additional interest and late fees on your debt. If you fail to stay in the program long enough to complete it, or if Freedom fails to negotiate a settlement, you’ll be stuck with the higher balance.

You may still hear from debt collectors

Because you stop paying your accounts, you may experience aggressive collection attempts or even lawsuits from your creditors. Freedom says it encourages clients to tell creditors they are working with the settlement company and to upload communications to Freedom via their personal online dashboard.

Forgiven debt may be taxed

Because the IRS considers forgiven debt as taxable income, it’s possible you’ll owe taxes on the amount of debt you no longer had to pay after settling. Some creditors will send a Cancellation of Debt form 1099-C. One exception is if you are insolvent (have more liabilities than assets) at the time you settle debts with your creditors.

Speaking with a tax professional or lawyer for further guidance is recommended.

Freedom Debt Relief vs. other options

Before choosing debt settlement, understand other options, including debt payoff and other debt relief options:

Debt management plan

This may be a better option for someone who has a steady income to repay credit card debts within three to five years. You’ll pay a nonprofit credit counseling agency to consolidate your debts into one monthly payment at a reduced interest rate. But you won’t have access to new credit or be able to use your credit cards during the payoff period.

Debt consolidation

With this option, you’ll transfer multiple debts into one new debt, usually via a balance transfer credit card or a debt consolidation loan. The new debt should carry a lower interest rate than your old debts, potentially helping you pay off your debt faster. But it often requires good to excellent credit to qualify or to get good terms.


Bankruptcy can resolve your debt under protection from a federal court. Chapter 7 bankruptcy will typically erase most unsecured debts in three to six months, but not everyone qualifies. If you’re delinquent on debt, filing for bankruptcy will stop calls from collectors and lawsuits against you. Your credit will take a hit, as with debt settlement, but research shows credit scores tend to rebound within a year.

DIY debt settlement

You can pick up the phone, call your creditors and negotiate with them yourself. As with using a debt settlement company, success isn't guaranteed, but it could save you time and money.

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