What to Do When Drowning in Debt
Cut what you owe with budgeting, extra income and debt relief
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Americans' household debt is at an all-time high of $18.4 trillion, according to a recent report from the Federal Reserve Bank of New York. So if you’re feeling overwhelmed by debt, you’re not alone.
“The first step is to acknowledge there’s a problem and that you are ready to take action,” Austin Kilgore, an analyst with the Achieve Center for Consumer Insights, said. “Instead of worrying, talking about it and losing sleep over your financial situation, do your research and make a real plan to eliminate your debt. The right solution will be different for everyone.”
Creating a budget is the first step to taking control of your finances and prioritizing essential expenses.
Jump to insightIncreasing your income through side hustles or additional work can accelerate debt repayment.
Jump to insightExploring debt relief options like consolidation or settlement can simplify and reduce your debt burden.
Jump to insight5 steps to eliminating debt
Progress may be slow at first, but once you’re ready to take action, you’re already moving in the right direction. Here’s what you can do to accelerate your path toward a debt-free life.
1. Create a budget
After you’ve accepted that your debt needs attention, the next step is to create a budget and take control of it. A popular budgeting method is zero-based budgeting, which assigns every dollar a job so you can be intentional with your spending.
Here’s how it works: start with your income, subtract your fixed expenses and then decide where the rest should go. Update it each month as your situation changes or you pay off debt.
Give every dollar a job
A zero-based budget means assigning every dollar to a specific purpose and making debt payments a top priority — before extras like dining out or entertainment.
If your budget is tight, focus on covering your essentials first, like food, utilities, housing and transportation. Once those are handled, any leftover cash can go toward paying off debt. Prioritizing in this way keeps your budget realistic without derailing your progress.
2. Increase your income
Getting out of crippling debt on a low income can be difficult because there’s only so much you can allocate toward paying off debt if your income stays the same. If you want to accelerate your debt payoff journey without pinching pennies or sacrificing your quality of life, work on increasing your income.
You can make extra money with side hustles like food delivery, freelance work or selling used items on sites like eBay. You’ll then want to put that income straight toward your debt, not your everyday spending.
Yes, increasing your income might mean sacrificing your free time or weekends for a bit, but it will be worth it. The faster you eliminate your debt, the sooner you free up your income for savings, goals and peace of mind.
3. Explore debt relief options
If your budget and extra income still aren’t enough to get ahead, debt relief programs such as credit counseling, debt consolidation and debt settlement can help you restructure or reduce what you owe.
Credit counseling
If you’re drowning in debt, you might consider credit counseling. Credit counselors can help you make a plan to tackle your debt and educate you on managing your money. The U.S. Department of Justice maintains a database of approved credit counseling agencies in each state if you need help finding one.
The U.S. Department of Justice database is the best way to find approved credit counseling agencies.
Debt consolidation
Another route is debt consolidation, which means combining your debts into one monthly payment, ideally at a lower rate. This can make your debt a lot easier to manage, provided that you qualify for a loan with solid terms.
Debt settlement
Debt settlement is a more aggressive option, where you try to settle for less than what you owe. These services can charge expensive fees with no guarantee, so make sure you understand the risks and review vetted providers before going that route.
4. Avoid new debt
Taking on more debt when you’re already struggling to pay off your existing balances will only make things worse. If you’ve been relying on your credit card for all your spending, consider giving it up for a while or even cutting it.
Cutting up credit cards might sound dramatic, but it works. Research shows that using credit cards can activate reward centers in the brain, which could lead to increased spending compared to using cash. Physically removing that temptation can help shift your mindset and spending habits.
Remove temptation
Cutting up credit cards or storing them away can help stop new charges while you focus on repayment.
That’s not to say using credit cards is never a good idea. But if you’re behind on payments or feel out of control, taking a break can help you reset your habits and catch up on your credit card debt. Once you’re back in the driver's seat of your finances, you can use credit more intentionally.
5. Use the debt snowball method
The debt snowball method is a debt repayment strategy where you pay off debt in order of smallest balance to largest balance. You’ll still make minimum payments on everything else while throwing any extra money at that smallest balance.
Once the first debt is gone, you roll that payment into the next smallest one. Over time, the amount “snowballs,” and your balances shrink faster. Unlike strategies that prioritize interest rates, this one prioritizes quick wins to build momentum.
Build momentum with the snowball method
Paying off the smallest balances first gives you quick wins that can boost motivation and keep you on track with your payoff plan.
Another equally popular debt repayment strategy is the debt avalanche method, which focuses on paying off the highest-interest debt first. Though it could save you more money on interest payments in the long run, the snowball method is usually easier to stick with because you see progress sooner, and that momentum keeps you going.
FAQ
What to do when you are in extreme debt?
If you're in extreme debt, start by figuring out exactly what you owe and to whom. Then, contact your creditors to ask about hardship programs or negotiate lower payments. You’ll also want to consider working with a nonprofit credit counselor who can help you create a plan to tackle your debt.
What should I do if I cannot pay my debt?
If you can’t repay your debt, ask your creditors if they offer any hardship programs or flexible repayment options. A nonprofit credit counselor can also help you explore debt management or consolidation options.
Whatever you do, don’t ignore your debt. That will only get you into more trouble, like lawsuits and long-term credit damage.
How can I negotiate with creditors?
To negotiate with creditors, you’ll want to be polite and upfront about your financial situation. Ask them about whether they can reduce your payments, waive fees or agree on a settlement amount. Make sure to take notes during your conversation and request written confirmation of any verbal agreement.
Why is it important to stop using credit cards when in debt?
Using credit cards while you’re already in debt is like adding fuel to the fire. It’s important to stop because every new charge increases your balance and interest, making it harder to catch up. Taking a break from charging helps you focus on paying off what you already owe.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- Federal Reserve Bank of New York, “Household Debt and Credit Report.” Accessed Aug. 19, 2025.
- U.S. Trustee Program, “List of Credit Counseling Agencies Approved Pursuant to 11 U.S.C. § 111.” Accessed May 26, 2025.
- MIT Sloan School of Management, “How credit cards activate the reward center of our brains and drive spending.” Accessed May 26, 2025.
