Need-to-Know Terms

Debt arbitration – Industry created around the practice of debt settlement. Third-party institutions that work on behalf of their clients to negotiate out-of-court settlements for old bills, invoices, lawsuits, liens, medical bills, utility bills, judgments, and other types of debt. Debt arbitrators may be used in lieu of credit counseling as a way to avoid bankruptcy.

Debt collector - Someone who works in the in-house collections department of an original creditor or a collection agency to track down debtors and get them to pay what they owe.

Debt consolidation - The replacement of multiple loans with a single loan, often with a lower monthly payment and a longer repayment period. Also called a consolidation loan.

Debt settlement - Debt settlement involves negotiating with a creditor or creditors to pay off a percentage of your total debts at an agreed upon settlement amount.

Discharge - The legal elimination of debt through a bankruptcy case. When a debt is discharged, it is no longer legally enforceable against the debtor, though any lien which secures the debt may survive the bankruptcy case.