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Debt relief programs and solutions

Learn how to manage debt

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What is the best debt relief program?

If you need help with debt, you have options. The type of debt relief you choose will depend on your financial need, abilities and desired outcome.

  • Credit counseling is a form of financial education designed for people who need general financial advice, help making a budget or guidance on reducing debt. Many credit counselors offer low-fee or free options.
  • Debt consolidation is the act of combining multiple debts into one monthly payment, generally at a lower interest rate or longer repayment term. You can consolidate debt on your own or with a professional debt consolidation company.
  • Debt settlement is the process of negotiating with creditors to accept a lower payoff amount to consider the account paid in full. A debt settlement company can negotiate for you.
  • Bankruptcy is a legal proceeding that wipes out qualifying debt and gives the debtor a fresh start. It is usually a last resort since it can be detrimental to your credit score.

What is debt relief?

Debt relief is an umbrella term referring to a variety of programs, practices and financial methods designed to help consumers escape debt faster and more easily. The most common types of debt relief are credit counseling, debt settlement, debt consolidation and bankruptcy.

How does debt relief work?
Debt relief programs aid consumers by helping them to completely pay off their debt and/or by slowing debt growth. Debt relief programs focus on forming better financial habits for the consumer and occasionally settling or consolidating debt. Filing for bankruptcy is usually reserved for when all other options have been exhausted. When coupled with smarter spending and saving habits, debt relief programs can prove useful in slashing debt or eliminating it completely.

Debt relief programs work with unsecured debt, which means debt like mortgages and car loans (secured by collateral) will not qualify. The most common types of debt for settlement or consolidation programs include credit card debt, medical bills, private student loans or other personal loans.

When should you get debt relief help?
If you have more than $5,000 in unsecured debt, you may qualify for debt relief solutions, although some debt settlement companies require a higher minimum debt of $7,500 or $10,000. For debt settlement programs, you’ll need to be able to demonstrate financial hardship and be more than a few months behind on your payments (creditors will have more incentive to settle). For debt consolidation, you’ll need to have good credit and have the financial ability to make monthly payments on your new loan.

There are no real debt relief qualifications to seek credit counseling, and it’s better to go early and get advice on how to prevent your debt from getting worse. This is especially true for anyone who is unfamiliar with budgeting or financial management.

Credit counseling

Credit counseling is best for those who want a professional consultation on the state of their finances. Unlike other debt help programs, credit counseling doesn’t have a list of qualifications. Anyone can seek help from a credit counselor, regardless of debt level or income. The goal of credit counseling is to review your individual financial situation, make suggestions, recommend budgets and provide resources for tackling debt.

After assessing your situation, a credit counselor may develop a debt management plan for you, which can include debt consolidation or settlement with the goal of being debt free within 3–5 years. With a debt management plan, you’ll pay the credit counselor/firm a monthly fee, and the counselor will pay your creditors. You are not required to enter a repayment program as a result of credit counseling.

Learn more about credit counseling

Debt settlement

Debt settlement is best for those looking to reduce their overall amount of debt. In debt settlement, a debt relief professional will act as your representative and negotiate your debts on your behalf. For debt settlement to work effectively, you need to be several months behind on your payments and/or be in a significant amount of debt. These scenarios make the idea of settling more appealing to creditors, as they’d rather get some money for your debts than have you default altogether.

Because of the above criteria, a debt settlement company will likely recommend you stop paying even small amounts on your debt and instead put that money into an account they manage, which will be used to pay your settled bill once an agreement has been reached. Settlement companies do charge a fee for their services, generally 15–25 percent of the settled amount. This fee is usually baked into the monthly payment you make to your settlement account.

Learn more about debt settlement

Debt consolidation

Debt consolidation is best for those looking to make their debt payments more manageable. Debt consolidation streamlines your repayment process by moving all debt to one account, meaning you only have one payment to make each month. Debt consolidation loans can be an attractive option because they generally include either a reduced interest amount or longer repayment terms than the original debt. With the longer repayment term comes the potential that you may end up paying more in the long run, but the extra time or lower payments can be worth it to those in a financial bind.

Learn more about debt consolidation


Bankruptcy isn’t something to enter into lightly but is an option available for those who don’t see another way out of their financial situation. To file for bankruptcy, you are required to receive credit counseling (before filing) and debtor education (after filing). These safeguards are in place to help set you up for stronger financial health moving forward. The most common type of personal bankruptcy is chapter 7 bankruptcy, which will likely require the liquidation of some of your personal property to provide partial payments to creditors. Not everyone qualifies for bankruptcy. To see if you qualify you can complete a “means test” on the US Court’s website.

Learn more about bankruptcy

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Bottom line: Is debt relief a good idea?

Debt relief programs can help streamline or reduce your personal debt repayment. For the assistance they provide, these programs do carry additional fees. Debt relief programs are going to be best for those with large amounts of debt who can’t get out of it on their own. If you feel like you’re drowning in debt or entering a cycle you can’t escape from, it may be time to seek a debt relief program.

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