Since we are bankruptcy attorneys, creditors recognize that the vast majority of the people we represent do in fact file bankruptcy.  This generally causes unsecured creditors to ask us if our clients are interested in settling their debt. If the negotiation is successful your creditor will agree to accept a negotiated sum, in exchange for a lump sum payment of less than the full amount owed. Generally, our average settlement is between 40 – 50%.  Keep in mind however that this is only an average and actual results vary from person to person depending on the type of debt, the amount of the debt and when the debt was incurred. At times a higher percentage is required. Some creditors may refuse to accept an amount less than what is owed. Some creditors may refuse to negotiate and instead make efforts to aggressively collect the debt including filing a lawsuit. Debt settlement does not offer the same blanket protection as bankruptcy and collection activities may continue unless and until a debt is settled. The most significant challenge to settling unsecured debt is funding potential settlements. Because most creditors will require lump sum payments, the ability to settle debt will heavily depend on whether or not you can raise the funds necessary to settle with your unsecured creditors in a relatively short period of time.