Freedom Debt Relief Review 2026: Is It Legit and Is It Worth It?

Debt can spiral when you don’t have a financial cushion, and it’s not always easy to know where to turn. According to TPH’s State of Savings research, 42% of working Americans don’t have $1,000 in emergency savings, and 45% have completely drained what they had. 

Debt settlement companies, such as Freedom Debt Relief, are one option available to consumers. Freedom is a legitimate company that’s been around since 2002 and is accredited by the Association for Consumer Debt Relief. The company says it’s helped more than 1 million customers, and depending on your situation, they might be able to help you, too. 

But the company isn’t a magic eraser for debt. Although it might help clear some of the mess, debt settlement can also wreck your credit score and leave you with a massive tax bill. 

Below, we’ll cover what Freedom Debt Relief actually does, how much it costs and how to decide whether working with this company is right for you.

Is Freedom Debt Relief Legit?

Yes, Freedom Debt Relief is a legitimate company. 

Freedom says it’s served more than 1 million clients and resolved more than $20 billion in debt since 2002. It has an A+ rating from the Better Business Bureau and a 4.5-star Trustpilot rating with more than 49,000 reviews.

But it’s important to understand how the company operates. Freedom Debt Relief is a debt settlement company, which means it tries to negotiate your debts for less than you owe — usually after you stop paying your creditors.

That can lower your debt, but it can also cause your credit score to plummet and potentially create a surprise tax bill. 

In 2019, the Consumer Financial Protection Bureau settled a lawsuit against Freedom Debt Relief for allegedly charging consumers without settling debts as promised and misleading people about fees. 

So while Freedom Debt relief is legit, that doesn’t automatically mean the company is your best option. If you’re not sure about working with them, Freedin offers a free consultation prior to enrollment so you can see if their services align with your needs.

What Is Freedom Debt Relief and How Does It Work?

Freedom Debt Relief is a debt settlement company that negotiates with creditors to settle eligible debts for less than the full amount owed.

That’s different from debt consolidation, where you roll several debts into one new loan. It’s also different from nonprofit credit counseling, which usually involves repaying the full balance but typically with lower interest rates through a structured debt management plan. 

With Freedom Debt Relief, the goal is debt reduction. You stop paying creditors, save money in a dedicated account and wait while the company tries to negotiate settlements. 

Here’s the step-by-step process:

1. Enroll your unsecured debts: That includes debt from credit cards, medical bills and personal loans. Federal student loans, car loans and mortgages aren’t eligible.
2. Stop making payments to enrolled creditors: This creates negotiating leverage — but it can also damage your credit and may trigger collection activity.
3. Make monthly deposits into a dedicated savings account: This money will be used to make settlements with creditors. You retain control over the account; Freedom doesn’t have access to those funds. However, you’ll need to pay a one-time $9.95 setup fee and a $9.95 monthly servicing fee for the account. 
4. Freedom negotiates with creditors: The company will try to negotiate a lower payoff amount with your creditors. Initial settlements can usually happen within four to six months for accounts that are delinquent, according to the company. 
5. You approve each settlement before any payment is made: Creditors get paid from the account you’ve been funding. 
6. Freedom collects its fee: The company takes 15–25% of your enrolled debt amount after a settlement is completed.
7. The process repeats until all enrolled debts are resolved: The entire program can take two to four years. 

For an overview of how debt settlement works, check out TPH’s guide on how debt settlement works.

Freedom Debt Relief Fees: What You’ll Actually Pay

Freedom Debt Relief charges a fee of 15%-25% of the debt you enroll. “Enrolled debt” simply means the debts you enter into the debt settlement program. 

You won’t pay anything upfront to Freedom Debt Relief — you’re only charged after each individual debt is settled.

The 15-25% fee Freedom charges is based on your enrolled debt, not the smaller amount your creditor agrees to settle for. Freedom says the exact fee depends on your state of residence.

Here’s an example:

• You enroll $20,000 in credit card debt.
• Freedom negotiates creditors down to $11,000.
• Freedom’s fee is 15–25% of $20,000 — that’s $3,000 to $5,000
• Your total out-of-pocket: $11,000 (settled) + $3,000 – $5,000 (fee) = $14,000 to $16,000.

So yes, you might save money, but not as much as you might think. 

The CFPB Lawsuit Against Freedom Debt Relief

The Consumer Financial Protection Bureau settled a lawsuit against Freedom Debt Relief in 2019 over allegations that the company charged consumers without settling debts as promised and misled consumers about its services.

Under the settlement, Freedom was forced to pay $20 million in restitution to affected consumers and a $5 million civil money penalty. 

The CFPB said Freedom violated the Consumer Financial Protection Act of 2010 by allegedly:

• Charging customers fees even when it didn’t settle debts as promised.
• Charging consumers after some consumers negotiated their own settlements.
• Misleading consumers about its fees.
• Misleading consumers about its ability to negotiate directly with all creditors.

Freedom neither admitted nor denied the allegations. As a result of the settlement, Freedom must now follow enhanced disclosure requirements and specific compliance obligations. 
See the CFPB enforcement action page for details.

Risks of Using Freedom Debt Relief

Freedom Debt Relief might be able to help you settle your debt for less than you owe, but there are significant tradeoffs every consumer should understand. 

After all, you’re not simply signing up for a lower payoff amount. You’re signing up for missed payments and a whole lot of uncertainty while the program plays out.

Here are four major risks of using a debt settlement company like Freedom. 

Credit Score Damage

One of the first steps in working with a debt settlement company is stopping payments to the creditors included in the program.

That can cause your credit score to nosedive. FICO says missing a payment can cause a “substantial loss of points,” especially for people with otherwise clean credit files. And the damage gets worse as your accounts become increasingly delinquent. 

Missed and late payments appear on your credit report immediately. Eventually, settled debts might get reported as “settled for less than the full balance,” which is better than leaving a debt unpaid forever — but it still leaves a negative mark on your credit report for seven years. 

There are obvious reasons people try to protect their credit. A bruised credit report can make it harder to rent an apartment, qualify for a car loan or even get hired for certain jobs.

Creditor Lawsuits

Creditors aren’t required to play nice and stop collection activity or agree to settle while you’re in the program. In fact, creditors can sue you while you’re using Freedom Debt Relief.

That’s one of the biggest risks. You could spend months making deposits into your dedicated account while a creditor decides to take you to court, which could end up costing you far more than if you had simply paid off the original debt. 

Debt settlement also doesn’t give you the legal protection that bankruptcy does. So there’s no law forcing creditors to stop collection lawsuits, wage garnishment or other collection activity.

If you’ve already been sued, or you think a lawsuit is coming, debt settlement is probably a bad idea. Start with a consumer bankruptcy attorney or legal aid organization instead.

Tax Liability on Forgiven Debt

Forgiven debt can be taxable because the IRS generally treats it as income.

IRS Publication 4681 says that if a debt is canceled or forgiven for less than the full amount you owe, you may have taxable income. 

Here’s an example. If $10,000 of your debt is forgiven through a settlement, you’ll owe income tax on that amount at your regular tax rate. So if you’re in the 22% bracket, that’s a $2,200 federal tax bill. 

If you’re settling multiple debts, make sure to speak to a tax professional first. And remember: Owing thousands in federal taxes ultimately reduces how much you “save” by using this service. 

No Guarantee of Results

Freedom can negotiate on your behalf, but it can’t force creditors to say yes.

Some creditors may refuse to settle. Others may hold out longer than expected. That means you could spend months making deposits, missing payments and damaging your credit with nothing to show for it in the end. 

Plus, the accumulated penalties and late fees on the unsettled debts can wipe out any savings a debt settlement company achieves, according to the CFPB. The agency warns consumers that working with these kinds of companies can leave you deeper in debt than you were when you started.

It’s an ugly truth settlement ads tend to gloss over. The program may work well if your creditors cooperate and you can stick with the payments. But if your biggest creditor won’t settle, the whole process can do more harm than good. 

Freedom Debt Relief Pros and Cons

Freedom Debt Relief can help some people, but the potential downsides shouldn’t be taken lightly.

Who Should Consider Freedom Debt Relief?

Freedom Debt Relief might be worth considering if you have serious unsecured debt (more than $7,500), can’t afford minimum payments and want to avoid bankruptcy.

The company might be a good fit if:

• You have over $7,500 in unsecured debt.
• You’re already behind on debt payments.
• Your debt is mostly credit cards, medical bills or personal loans.
• You can afford the monthly program deposits.
• You don’t need a strong credit score anytime soon.
• You understand creditors can still sue you and garnish your wages.
• You’ve compared debt settlement with other options, such as credit counseling and bankruptcy.
• You’ve read and understood the fee agreement.

Who Should Skip Freedom Debt Relief

Freedom Debt Relief probably isn’t a good fit if your debt is still manageable or you’ll need a decent credit score in the near future.

The company likely isn’t a good fit if:

• You can still afford your minimum payments.
• Your primary debts are federal student loans, auto loans or mortgage debt.
• You qualify for a nonprofit debt management plan.
• You need to buy a home, rent an apartment or finance a car in the next two to three years. 
• You’re already facing a creditor lawsuit.
• Your income is inconsistent or unpredictable. 
• You’re looking for a quick, credit-friendly fix.

It’s important to recognize that debt settlement companies usually can’t get better negotiation terms than you could get by negotiating directly with lenders yourself, according to the CFPB.

Alternatives to Freedom Debt Relief

Before enrolling in any debt settlement program, it’s worth considering faster, cheaper or less damaging alternatives. 

National Debt Relief

National Debt Relief is the largest direct competitor to Freedom, and the two companies work in a similar way. You enroll unsecured debt, make monthly deposits into a dedicated account and wait while the company tries to negotiate settlements with your creditors.

The main differences are pricing and regulatory history. National Debt Relief says its fees typically range from 18% to 25% of enrolled debt while National Debt Relief says it charges fees up to 25%. And unlike Freedom, National Debt Relief doesn’t have a major CFPB enforcement action in its recent history.

That doesn’t make National Debt Relief the better choice. But if you’re researching debt settlement companies, National Debt Relief is the obvious one to compare side by side with Freedom.

For a full breakdown, see our National Debt Relief review.

Nonprofit Credit Counseling

Nonprofit credit counseling is less risky than debt settlement.

A debt management plan through a nonprofit credit counseling agency can lower your interest rates, waive fees and combine your debts into one monthly payment. You usually repay the full balance over 30 to 60 months, according to the National Foundation for Credit Counseling.

By going this route, you might not get the dramatic balance reduction debt settlement promises. But you’ll also typically avoid the worst credit damage, tax issues and lawsuit risk.

This service typically costs about $25 to $50 per month, though some nonprofit credit counseling agencies may waive fees or reduce the cost based on your income.

This is the best option for people who can afford to repay their debt if interest rates and fees are reduced.

Debt Consolidation Loan

Debt consolidation replaces multiple debts with one new loan, usually at a lower interest rate.

This can work well if your credit score is still decent (think 580 and higher) and you qualify for a lower rate. It won’t reduce your principal balance, but it can simplify repayment and potentially make it cheaper.

However, if your credit is already damaged, the loan may come with a high interest rate, which defeats the whole point of consolidating into a single loan. 

This is a good option for people with fair to good credit who want a streamlined payoff plan that doesn’t include skipping payments. 

Bankruptcy

Filing for bankruptcy can be a faster process than debt settlement. It also offers more legal protection from creditors, especially if you’re already being sued.

Chapter 7 bankruptcy can erase many unsecured debts in four to six months, though you have to make sure you qualify first. It also creates an automatic stay, which can stop many collection actions. 

The downside is that Chapter 7 can stay on your credit report for up to 10 years.

Debt settlement may feel less drastic than bankruptcy, but the reality is it can drag on for years and ultimately might not reduce any of your debts. For some borrowers, bankruptcy is worth exploring. 

This option tends to be best for people with overwhelming unsecured debt and limited assets.

Freedom Debt Relief Customer Reviews and Complaints

Trustpilot lists a 4.5-star rating for Freedom Debt Relief with over 49,000 reviews. The BBB lists the company as accredited with an A+ rating, though it also shows 289 BBB complaints filed over the last three years.

Positive reviews often cite helpful customer service, successful settlements and relief from overwhelming debt.

Complaints tend to focus on the hard truths of debt settlement, including confusion over fees, frustration with program timelines, collection activity, lawsuits and communication issues.

Those mixed reviews make sense. Debt settlement can feel amazing if your debts get settled but it can feel terrifying while you’re waiting and hoping creditors play along.
See if Freedom Debt Relief can help you with your debt.

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Rachel Christian is a freelance financial journalist who helps readers make sense of money — from investing and taxes to retirement and everyday personal finance. Her work has been featured in Yahoo Finance, Business Insider, Bankrate, Orlando Business Journal and The Penny Hoarder.