Table of Contents

Debt Settlement

If your debt is so high you cannot even afford minimum payments and your debt keeps growing beyond your ability to handle it, you need help. A debt settlement is essentially when you negotiate with your creditors pay off your debt for less than is owed. This is normally done with a third-party agency that will negotiate on your behalf for you with your creditors. If the creditors agree to enter into a debt settlement arrangement then you would make regular payments to the third party and they would handle paying off your creditors.


The consequences of not settling your debts may be bankruptcy. There are also consequences if you do enter into a debt settlement agreement. A debt settlement will negatively impact your credit score and any amount of debt forgiven by a creditor will be considered taxable income by the Internal Revenue Service. A debt settlement may be just what you need to help you gain control of your debt and avoid bankruptcy, but it is a serious decision with consequences that will affect your financial future. 

Just For Wisconsin Residents

Wisconsin does not have any legislation specifically focused on debt settlement. This means there is more of the burden on you to be careful selecting an organization to help you with any debt settlement arrangement. We strongly encourage you to get everything in writing before entering into any sort of agreement. The document should specifically state exactly what services will be provided, what will not be provided, your options for canceling, and all fees or costs.

Take Action

The decision to enter into a debt settlement arrangement in Wisconsin is serious and can have some negative consequences, but taking no action is much worse. Avoiding your debt issues will not resolve them, it will just make them worse.

Credit Counseling

When looking for credit counseling services, a consumer can look to The University of Wisconsin for help. The university provides information on credit counseling specific to the state. The university notes that state law limits to $50 the initial budget setup fee a service provider can charge.

Some Wisconsin companies charge a flat monthly fee while others base their monthly fee on the number of accounts in your repayment plan. In Wisconsin, the maximum monthly fee cannot exceed 10 percent of the money sent to creditors or $120, whichever is less.

More on Wisconsin Law

The Wisconsin law addressing credit counseling also requires a copy of the service agreement or contract must be provided to the customer at the time of execution. And it must be signed by both the customer and the service provider.

Wisconsin even spells out how a service provider should organize their business down to restrictions on office space. The provider, for instance, is not allowed to share office space or a waiting room with a practicing attorney, collection agency, justice of the peace, loan or finance company. And before any other type of business is allowed to operate on premises, permission must be granted by The Office of Administrator of the Division of Banking.

Office hours must be posted. And any forms used during the normal course of business must be approved by the Division of Banking. A separate bank account, other than the provider's own, must be opened to hold the consumers funds set aside for planned disbursement to creditors.

Finding a Service Provider

Once a consumer facing debt has decided on credit counseling and has a thorough understanding of Wisconsin law, the next step is to decide on a specific credit counseling service. One place to look is the U.S. Department of Justice. The department provides a list of approved credit counseling agencies state-by-state, including those operating in Wisconsin.

The University of Wisconsin recommends that a prospective customer asks questions of possible providers. Asking about the services they offer, printed information, and the fees they charge is important. But looking forward, the university suggests the consumer ask about the future and check to see if the provider can develop a plan to help the consumer avoid debt problems down the road.