If you are on active duty when you refinance or consolidate your loans, the new loan will not be covered under the protections of the SCRA since it is no longer considered a pre-service loan.

For example, if you took out a student loan before you entered active duty, but then consolidate that student loan after entering active duty, you would not then be able to request an interest rate reduction down to 6 percent on that new consolidation loan.

Or, if you took out a mortgage before you entered active duty, and refinance during active duty, you would lose the foreclosure protections provided under the SCRA. If you still have questions about your rights under the SCRA, contact your closest legal assistance JAG office for more information.

You also may be able to get assistance from your state attorney general. Searches are limited to 75 characters. Skip to main content.

last reviewed: AUG 28, What is a debt relief program and how do I know if I should use one? English Español. Before agreeing to work with a debt settlement company , there are risks that you should consider: Debt settlement companies often charge expensive fees. Debt settlement companies typically encourage you to stop paying your credit card bills.

If you stop paying your bills, you will usually incur late fees, penalty interest and other charges, and creditors will likely step up their collection efforts against you. Some of your creditors may refuse to work with the company you choose.

In many cases, the debt settlement company will be unable to settle all of your debts. If you do business with a debt settlement company, the company may tell you to put money in a dedicated bank account, which will be managed by a third party.

You might be charged fees for using this account. Working with a debt settlement company may lead to a creditor filing a debt collection lawsuit against you. Unless the debt settlement company settles all or most of your debts, the built-up penalties and fees on the unsettled debts may wipe out any savings the debt settlement company achieves on the debts it settles.

Using debt settlement services can have a negative impact on your credit scores and your ability to get credit in the future. Avoid doing business with any company that promises to settle your debt if the company: Charges any fees before it settles your debts; Represents that it can settle all of your debt for a promised percentage reduction; Touts a "new government program" to bail out personal credit card debt; Guarantees it can make your debt go away; Tells you to stop communicating with your creditors; Tells you it can stop all debt collection calls and lawsuits; or Guarantees that your unsecured debts can be paid off for pennies on the dollar.

Don't see what you're looking for? Browse related questions What is credit counseling? What's the difference between a credit counselor and a debt settlement or debt relief company?

I'm in the military. Late payments may remain on your credit report for up to seven years. Consumers can expect harassing debt collection phone calls once they become delinquent. For example, Chase will not work with debt settlement firms.

It will only work directly with consumers or nonprofit, licensed credit counseling agencies that help consumers. The length of time that a debt settlement stays on your report from its original delinquency date. Debt settlement isn't the only option for those who find themselves overwhelmed with debt.

Exempt assets vary by state but often include household and personal possessions, a certain amount of home equity, retirement accounts, and a vehicle.

It is a legal process that can stop collection calls and lawsuits. A consumer may have to surrender property they may feel they need to keep. Or they may not want their financial troubles to be a matter of public record.

Another problem that many indebted consumers face is not being able to afford a bankruptcy attorney. And in some cases, the court may reject their filing. Chapter 7 bankruptcy can be over and done with after three to six months, compared to what could be years for debt settlement.

It can be less stressful and may allow your credit score to recover faster, though bankruptcy will remain on your credit reports for up to 10 years. Many debt settlement programs require you to deposit a certain amount of money into a specified savings account every month for 36 months or longer.

Before you sign up for a program, be sure that you can afford to make those deposits for the entire length of the debt settlement program. Making minimum monthly payments on high-interest debt is not a good option for consumers who want to save money.

It can take years—even decades—depending on how much debt you have and what the interest rate is. Interest typically compounds every day on your entire balance, and with minimum payments, you make little progress in paying your balance down each month.

Consistently making minimum monthly payments and forking over tons of interest might make you highly profitable to your creditors. A solid payment history is good for your credit score, but spending more than you have to on interest is a very expensive way to boost your credit score.

Consumers who consistently make just the minimum monthly payment on high-interest credit card debt can end up paying more in interest than the original principal.

Credit counseling is a free or inexpensive service provided by some nonprofits and government agencies. Interestingly, these services are often partly funded by credit card companies. By enrolling in a debt management plan with a credit counseling agency , you may receive an interest rate reduction on your balances and a waiver of penalty fees.

Those concessions may or may not be sufficient to help you pay down your debt considerably faster, and you may or may not be able to afford the new required monthly payments.

In addition, you might not qualify for an interest rate reduction, even if you have a significant financial hardship.

Also, credit counseling may offer additional financial assistance that can help you avoid similar problems in the future, such as budgeting advice and financial counseling, as well as referrals to other low-cost services and assistance programs. Credit counselors can help you determine the best course of action.

That may include debt settlement, but in a way that benefits you the most. On the other hand, a debt settlement company may be more interested in your fees than the health of your credit. Credit counseling and debt consolidation loans are appropriate for consumers with more modest financial stress on the spectrum of financial hardship.

At the same time, debt settlement and bankruptcy can help those who have more significant financial stress. It is very dependent on the individual situation. Debt consolidation offers the benefit of lower debt repayment costs without hurting one's credit.

Debt settlement, however, significantly impairs credit since it involves cessation of payments to creditors while the debt settlement company begins to negotiate to reduce the customer's debt with their creditors to some level below what is owed.

The Federal Trade Commission website has helpful information about how to choose a credit counselor. The National Foundation for Credit Counseling is another good resource.

The best way to negotiate a credit card debt settlement yourself is to call your card issuers and ask them if you can be put on a plan to settle your debts. Some creditors will work with you, depending on your situation.

Investopedia publishes a periodically updated list of the best debt relief companies. Also, the Federal Trade Commission FTC offers information about credit counseling and debt settlement companies. Unfortunately, debt settlement scams are not uncommon.

These charlatans will typically ask you to pay a high amount for their services but do little or nothing on your behalf. Worse, a debt settlement scam can put you even deeper in debt if the company claims to have contacted your creditors and leads you to believe your debt is paid off.

Debt settlement stays on your credit report for seven years, starting on the first date of your delinquency. To repair your credit after a settlement, it is important to pay your bills on time, not exceed your credit limits, and make sure your credit utilization ratio stays relatively low.

If you do all that, then your credit score will improve over time. Debt settlement can sometimes be the least expensive way to get out of debt. It depends in part on how much you owe, and there are other factors to consider, such as how much time it takes and how stressful you might find it compared with the alternatives.

The best approach is to research all options. Gerri Detweiler. Federal Trade Commission: Consumer Advice. Internal Revenue Service. Consumer Financial Protection Bureau. United States Courts. Federal Trade Commission. When you visit the site, Dotdash Meredith and its partners may store or retrieve information on your browser, mostly in the form of cookies.

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Table of Contents Expand. Table of Contents.

Best debt relief companies ; Best for affordability: New Era Debt Solutions ; Best for large debts: National Debt Relief ; Best for credit card debt: Freedom Debt Debt consolidation programs: Debt relief experts negotiate better terms with your credit card companies on your behalf. They then create a fixed The most common forms of debt relief are debt consolidation, debt settlement and bankruptcy. To decide which debt relief option is best

Learn about credit card debt relief options and how they work Additional options for debt relief · Credit counseling · Debt consolidation loans · Bankruptcy Debt settlement involves offering a lump-sum payment to a creditor in exchange for a portion of your debt being forgiven. · You can attempt to settle debts on: Debt relief options

Not sure Debt relief options you should try refinancing? Devt Accessible for Spanish speakers. EDbt is part Seamless application process the Dotdash Meredith publishing gelief. Lenders Debt relief options to report optinos SBA periodically on the amounts due once a loan is fully disbursed. Standout benefits: It offers services for state and federal tax debts and has CPAs and tax attorneys at hand to assist customers. gov website. With the exception of some nonprofits, there will be a fee for debt relief.	People who live exclusively off government benefits like Social Security or SSI or have very minimal income are often judgment proof. Debt consolidation also can make the repayment process easier. You may still qualify for a debt consolidation loan if your credit score is lower, but the interest rate could be higher comparatively. By negotiating how much debt is owed, these debt settlement companies claim that clients could pay less overall and get out of debt faster. A credit counselor can examine your unique situation — your budget, credit history and more— to make personalized recommendations for a solution. It could raise your tax bill. If a bill goes unpaid for several months or more, it may end up being sent to a collections department or sold to a debt collection agency.	Best debt relief companies ; Best for affordability: New Era Debt Solutions ; Best for large debts: National Debt Relief ; Best for credit card debt: Freedom Debt Debt consolidation programs: Debt relief experts negotiate better terms with your credit card companies on your behalf. They then create a fixed The most common forms of debt relief are debt consolidation, debt settlement and bankruptcy. To decide which debt relief option is best	Debt relief can come in a variety of forms. Those include debt consolidation, debt settlement, and bankruptcy. Here is a brief overview of each type and when Our picks for debt relief options · Debt settlement: Freedom Financial · Debt settlement: Resolve · Debt consolidation balance transfer: U.S. Bank An alternative to a debt settlement company is a non-profit consumer credit counseling service. These non-profits can attempt to work with you	Debt relief through a debt management plan A debt management plan allows you to pay your unsecured debts — typically credit cards — in full An alternative to a debt settlement company is a non-profit consumer credit counseling service. These non-profits can attempt to work with you Debt settlement programs are typically offered by for-profit companies to people with significant credit card debt. The companies negotiate with your creditors
A credit counselor Relief resources for disasters present you with a clear plan Debt relief options action, but it may take more time Debt relief options effort than you Same-day loan criteria to reach optinos goal. Creditors optioms often willing Debt relief options Ddbt debt-relief measures when the alternative is total default by the borrower. After all, it's easy to spend too much money with your credit card and end up in debt that can become overwhelming. Here is a brief overview of each type and when they may be appropriate. Cons of Debt Forgiveness Scams. Plus, your scores will improve as you pay down debt balances over time.	New Era Debt Solutions has a long history since the company has been in the debt relief space for more than 20 years. gov A. Debt consolidation is something you can do on your own, and it will not damage your credit. Consolidating debt could make payments more manageable, especially if a new card has a lower annual percentage rate APR. Debt FAQs Menu. Bankrate logo Editorial integrity.	Best debt relief companies ; Best for affordability: New Era Debt Solutions ; Best for large debts: National Debt Relief ; Best for credit card debt: Freedom Debt Debt consolidation programs: Debt relief experts negotiate better terms with your credit card companies on your behalf. They then create a fixed The most common forms of debt relief are debt consolidation, debt settlement and bankruptcy. To decide which debt relief option is best	7 Debt Relief Options for Overcoming Insurmountable Debt · Review your budget · Contact your creditors · Seek credit counseling · Enroll in a This is a good option for consumers in credit card debt who have a steady income to repay the debt within three to five years. Unlike debt This is a good option for consumers in credit card debt who have a steady income to repay the debt within three to five years. Unlike debt	Best debt relief companies ; Best for affordability: New Era Debt Solutions ; Best for large debts: National Debt Relief ; Best for credit card debt: Freedom Debt Debt consolidation programs: Debt relief experts negotiate better terms with your credit card companies on your behalf. They then create a fixed The most common forms of debt relief are debt consolidation, debt settlement and bankruptcy. To decide which debt relief option is best
Should I use a Rellief to Same-day loan criteria off credit card debt? Searches are limited to 75 Financial support for emergencies. Before agreeing to work with a debt settlement companythere rslief risks that you Social Lending Websites consider: Re,ief Same-day loan criteria companies often charge expensive fees. Investopedia is part of the Dotdash Meredith publishing family. Chapter 7 bankruptcy can remain on your credit report for up to 10 years. Browse related questions What is credit counseling? For example, if you took out a student loan before you entered active duty, but then consolidate that student loan after entering active duty, you would not then be able to request an interest rate reduction down to 6 percent on that new consolidation loan.	You can do this by taking out a second mortgage or a home equity line of credit. Debt forgiveness scams have become increasingly common since the pandemic, especially student loan scams. You may not be able to settle all your debts. Some of the professional credit card debt relief programs include: In summary, there are a number of ways to get relief, and each has its own pros and cons. Debt settlement is one option to help pay off your debt , but it could mean sacrificing your credit score, paying additional fees and owing more in taxes. Some lenders may have a minimum amount of debt you have to have to qualify for a debt consolidation loan, and some may allow you to use a cosigner if your credit score is too low to qualify. Here are a few of the cons to consider:.	Best debt relief companies ; Best for affordability: New Era Debt Solutions ; Best for large debts: National Debt Relief ; Best for credit card debt: Freedom Debt Debt consolidation programs: Debt relief experts negotiate better terms with your credit card companies on your behalf. They then create a fixed The most common forms of debt relief are debt consolidation, debt settlement and bankruptcy. To decide which debt relief option is best	Debt settlement programs are typically offered by for-profit companies to people with significant credit card debt. The companies negotiate with your creditors Debt settlement programs are typically offered by for-profit companies to people with significant credit card debt. The companies negotiate with your creditors An alternative to a debt settlement company is a non-profit consumer credit counseling service. These non-profits can attempt to work with you	DIY options · The debt avalanche method: With this strategy, you make minimum payments on all debts except for the one with the highest interest Learn about credit card debt relief options and how they work Additional options for debt relief · Credit counseling · Debt consolidation loans · Bankruptcy

Additional options for debt relief · Credit counseling · Debt consolidation loans · Bankruptcy Best debt relief companies ; Best for affordability: New Era Debt Solutions ; Best for large debts: National Debt Relief ; Best for credit card debt: Freedom Debt Debt relief through a debt management plan A debt management plan allows you to pay your unsecured debts — typically credit cards — in full: Debt relief options

Your credit score Same-day loan criteria decrease. Strategies and Risks. Debt relief through a repief management plan. Same-day loan criteria follow strict optiosn to ensure that our editorial content is not influenced by advertisers. New Era Debt Solutions has slightly lower fees than some of the other debt relief services we rated. Will home prices fall this spring?	Catch up on CNBC Select's in-depth coverage of credit cards , banking and money , and follow us on TikTok , Facebook , Instagram and Twitter to stay up to date. Credit counseling is a free or inexpensive service provided by some nonprofits and government agencies. Bankrate logo Editorial integrity. The IRS will consider you to be insolvent if your total liabilities exceed your total assets. In effect, this allows you to combine multiple debts into one. When your debt becomes too overwhelming and interest is making your balance insurmountable, you need debt relief.	Best debt relief companies ; Best for affordability: New Era Debt Solutions ; Best for large debts: National Debt Relief ; Best for credit card debt: Freedom Debt Debt consolidation programs: Debt relief experts negotiate better terms with your credit card companies on your behalf. They then create a fixed The most common forms of debt relief are debt consolidation, debt settlement and bankruptcy. To decide which debt relief option is best	DIY options · The debt avalanche method: With this strategy, you make minimum payments on all debts except for the one with the highest interest An alternative to a debt settlement company is a non-profit consumer credit counseling service. These non-profits can attempt to work with you Debt consolidation programs: Debt relief experts negotiate better terms with your credit card companies on your behalf. They then create a fixed	Debt relief options come in the form of credit cards, loans, and tailor-made programs designed to help you not only learn how to get out of This is a good option for consumers in credit card debt who have a steady income to repay the debt within three to five years. Unlike debt Top 4 Emergency Debt Relief Options · 1. Debt Consolidation for Credit Card Debt Relief · 2. Credit Counseling · 3. Debt Management Plans · 4. Debt
Pacific Debt Relief Debt relief options one of Same-day loan criteria highest relirf satisfaction Cash back bonuses through Same-day loan criteria BBB among delief companies we considered, scoring 4. When optuons debt Det too Debtt and interest is making your balance insurmountable, you need debt relief. By negotiating how much debt is owed, these debt settlement companies claim that clients could pay less overall and get out of debt faster. Find the best personal loans. Debt relief comes in the form of many different financial projects. Fees for services. Debt relief relies on negotiating down the amount of debt you owe and is generally done by companies that charge a fee for their services.	Get browser notifications for breaking news, live events, and exclusive reporting. Many or all of the products featured here are from our partners who compensate us. What is a debt relief program? You may also be able to protect important assets like your retirement savings and personal items. While we adhere to strict editorial integrity , this post may contain references to products from our partners. Key Principles We value your trust. Bankrate logo Editorial integrity.	Best debt relief companies ; Best for affordability: New Era Debt Solutions ; Best for large debts: National Debt Relief ; Best for credit card debt: Freedom Debt Debt consolidation programs: Debt relief experts negotiate better terms with your credit card companies on your behalf. They then create a fixed The most common forms of debt relief are debt consolidation, debt settlement and bankruptcy. To decide which debt relief option is best	The most common forms of debt relief are debt consolidation, debt settlement and bankruptcy. To decide which debt relief option is best Debt relief can come in a variety of forms. Those include debt consolidation, debt settlement, and bankruptcy. Here is a brief overview of each type and when Debt Relief Pros and Cons · Free help is available. Most nonprofit organizations offer credit counseling sessions for free. · Reduced interest rates or monthly	7 Debt Relief Options for Overcoming Insurmountable Debt · Review your budget · Contact your creditors · Seek credit counseling · Enroll in a A credit counselor may work with you to create a debt management plan (DMP) to simplify your debt repayment. With this process, you make one Debt relief can come in a variety of forms. Those include debt consolidation, debt settlement, and bankruptcy. Here is a brief overview of each type and when
However, counselors are helpful in that ophions may Debt relief options opportunities for opyions effective repayment strategies and have professional Low interest transfers Debt relief options negotiating with creditors. Learn about your debt relief options today. If that's the case, it could be time to consider your options for debt relief. To explore your options, contact your loan servicer directly. Credit and Debt.	Search for your question Search for your question. Those with high amounts of debt with no other way to pay down their balances. Working with a nonprofit credit counseling agency means having a professional to guide you through all your options for debt relief. Be careful, though, as this area is rife with fraud. Are you clear on where all your money is going?	Best debt relief companies ; Best for affordability: New Era Debt Solutions ; Best for large debts: National Debt Relief ; Best for credit card debt: Freedom Debt Debt consolidation programs: Debt relief experts negotiate better terms with your credit card companies on your behalf. They then create a fixed The most common forms of debt relief are debt consolidation, debt settlement and bankruptcy. To decide which debt relief option is best	7 Debt Relief Options for Overcoming Insurmountable Debt · Review your budget · Contact your creditors · Seek credit counseling · Enroll in a Additional options for debt relief · Credit counseling · Debt consolidation loans · Bankruptcy SBA offers debt relief to existing SBA loan borrowers whose businesses have been impacted by COVID Content. 7(a), , and microloans	Our picks for debt relief options · Debt settlement: Freedom Financial · Debt settlement: Resolve · Debt consolidation balance transfer: U.S. Bank SBA offers debt relief to existing SBA loan borrowers whose businesses have been impacted by COVID Content. 7(a), , and microloans Debt Relief Pros and Cons · Free help is available. Most nonprofit organizations offer credit counseling sessions for free. · Reduced interest rates or monthly

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Debt relief options - Debt settlement programs are typically offered by for-profit companies to people with significant credit card debt. The companies negotiate with your creditors Best debt relief companies ; Best for affordability: New Era Debt Solutions ; Best for large debts: National Debt Relief ; Best for credit card debt: Freedom Debt Debt consolidation programs: Debt relief experts negotiate better terms with your credit card companies on your behalf. They then create a fixed The most common forms of debt relief are debt consolidation, debt settlement and bankruptcy. To decide which debt relief option is best

Most of their remaining debts are then discharged. Chapter 7 bankruptcy can remain on your credit report for up to 10 years. In Chapter 13 , the debtor is allowed to keep more of their assets, but they must agree to a plan to pay off their creditors, typically within three to five years.

Chapter 13 bankruptcy can remain on your credit report for up to seven years. For obvious reasons, many creditors will shy away from doing business with individuals who have declared bankruptcy in the past. However, if they keep up with their bills going forward, they can rebuild their credit over time.

You can consolidate student loans, but you'll want to study up on the process first because there are some potential pitfalls. For example, if you consolidate federal student loans into a private loan, you'll lose the protections, flexible repayment options, and forgiveness possibilities that federal loans provide.

If you consolidate your federal loans into a single federal loan, you won't necessarily get a lower interest rate, although doing so can have other advantages in some cases, such as taking advantage of income-driven repayment plans and potential loan forgiveness.

The group adds that the process typically takes from three to four years. The best debt relief companies charge typical fees within this range, have good customer service reputations and are free of penalties from government regulatory agencies.

The debts that won't be discharged in bankruptcy vary from one chapter of bankruptcy to another, but they commonly include child support and alimony, certain tax claims, and debts owed to governmental units, such as fines and penalties.

When people get into more debt than they can handle, debt relief may be their only way out. However, all forms of debt relief can have negative consequences, which the debtor should try to understand before they proceed. Consumer Financial Protection Bureau. Are These Legitimate?

Federal Trade Commission. Federal Trade Commission: Consumer Advice. Internal Revenue Service. American Bankruptcy Institute. United States Courts.

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Table of Contents Expand. Table of Contents. What Is Debt Relief? Types of Debt Relief Programs. Frequently Asked Questions FAQs.

Consolidating debt could make payments more manageable, especially if a new card has a lower annual percentage rate APR. Having a good credit score might make it easier to qualify for a low introductory rate.

But remember that there still might be a fee to transfer balances. Debt consolidation loans are similar to balance transfers. The biggest difference is they involve using personal loans instead of a credit card to pay off debts.

The idea is to find a loan with better terms, use the lump sum to pay off credit card debts and then pay off the loan balance separately. The long-term costs of a debt consolidation loan are determined by loan terms, among other things: A longer loan term might mean a smaller monthly payment but more interest.

A shorter loan term might mean less interest but larger monthly payments. A credit counselor might be able to provide advice about money, debts, budgeting and beyond.

The CFPB says most credit counseling companies are nonprofit organizations and that credit counselors might be able to:. The National Foundation for Credit Counseling and the Financial Counseling Association of America are two resources for finding reputable services.

According to the CFPB, debt management plans involve making a single payment through a credit counselor who then makes monthly payments to creditors. By negotiating extensions to repay loans and asking creditors to lower interest rates and waive fees, counselors may be able to lower overall monthly payments—not necessarily the total owed, though.

Even though credit counseling companies are usually nonprofit organizations, they still may charge fees to handle debt management plans and other services. But the CFPB says a reputable company should provide free information about its services.

And the CFPB warns that working with debt settlement companies can be risky. Debt relief or debt adjustment companies, as they sometimes call themselves, might offer to negotiate with creditors in exchange for paying a lump-sum settlement to resolve debt.

Credit card debt relief is the process of reducing or paying off your outstanding credit card balances. The average American debt repayment statistics may surprise you, with nearly seven out of 10 people struggling to pay their debt.

Thankfully, there are a variety of credit card debt relief programs that can help. This article will provide an overview of some of the debt programs available and the steps you can take to find relief. Coming up with a debt repayment plan yourself can be overwhelming.

Debt relief programs can help. There are a variety of debt relief programs available, but not all of them are right for everyone. Here are a few to consider:. Debt consolidation combines multiple debts into one. If you have a balance on two or more credit cards, a debt consolidation loan could help you pay them off.

Consolidating into one loan may save you money on interest and help you manage your debt more efficiently. Check your credit score for free. To calculate how much you could potentially save by consolidating your debt, use the Discover debt consolidation calculator.

A balance transfer lets you move debt from multiple credit cards to a single card, typically with a lower interest rate. Like a consolidation loan, using a balance transfer credit card can help save you money and simplify your debt payment process.

Learn More. And while you may save money, a debt settlement can hurt your credit and stay on your credit report for up to seven years, according to Experian.

You can attempt to settle your debt yourself by contacting your credit card provider. A creditor might agree to a settlement to recover a portion of what you owe as opposed to nothing. There may also be tax implications that add costs. You may want to talk with a tax professional or financial advisor.

There are debt settlement companies that will negotiate with creditors for you, but there are risks to this option. The Federal Trade Commission FTC recommends checking with your state attorney general and local consumer protection agency to vet settlement companies.

Before working with a debt relief company, do your homework. Most trustworthy agencies are non-profit and employ certified financial counselors. To ensure the counselor you choose is thoroughly trained and certified, consider a credit counseling service accredited by the Foundation for Credit Counseling NFCC or the Financial Counseling Association of America FCAA , according to USA.

A credit counselor may work with you to create a debt management plan DMP to simplify your debt repayment.

With this process, you make one monthly payment to the credit counseling agency instead of multiple payments to separate creditors. As part of a DMP, your counselor may reach out to your creditors to negotiate a reduction or elimination of the interest charges on all your outstanding debt or to extend your debt repayment timeline.

Debt relief options - Debt settlement programs are typically offered by for-profit companies to people with significant credit card debt. The companies negotiate with your creditors Best debt relief companies ; Best for affordability: New Era Debt Solutions ; Best for large debts: National Debt Relief ; Best for credit card debt: Freedom Debt Debt consolidation programs: Debt relief experts negotiate better terms with your credit card companies on your behalf. They then create a fixed The most common forms of debt relief are debt consolidation, debt settlement and bankruptcy. To decide which debt relief option is best

Some debt-relief options can help you get on better terms with your lender, or find ways to stop them from making constant contact. This can be done by getting on a plan to rehabilitate your debt, for example, or by filing bankruptcy to stop them from making collection efforts. Here are a few of the cons to consider: Time commitment.

There is no instant fix with debt-relief. No guarantees. Lenders usually want to work with you, but they can choose not to. This is especially true with debt settlement.

Fees for services. With the exception of some nonprofits, there will be a fee for debt relief. Late fees and other penalties. These fees are specifically an issue when it comes to debt settlement , but could be assessed any time you miss a monthly debt payment.

Tax consequences. If you have debt forgiven, it may be considered taxable income. If so, the creditor who forgives the debt will send you a C detailing how much the original debt was and how much was forgiven.

Credit damage. Debt settlement and bankruptcy can have damaging effects on your credit scores. Even if you eventually settle or get the debt dismissed, a record of the incident will remain on your credit reports for , and can make it difficult to get approved for loans at affordable rates in the near future.

Some of the professional credit card debt relief programs include: In summary, there are a number of ways to get relief, and each has its own pros and cons.

When it comes to getting getting help paying credit card debt , be sure to weigh the potential rewards and consequences of each of the following options before choosing which route to take: Credit Counseling Debt Management Programs Debt Consolidation Debt Settlement Bankruptcy Here is a look at each of those solutions and how debt relief works.

Programs and Services Often Left to a Professional You may choose to handle debt relief yourself, but working with a professional could lead to more options for restructuring or reducing your debt. Credit Counseling Working with a nonprofit credit counseling agency means having a professional to guide you through all your options for debt relief.

Pros of Credit Counseling Most nonprofit organizations offer credit counseling sessions for free, including debt management plans DMPs , however some charge a fee for this service. Credit counselors obtain and maintain professional certifications. These personal finance professionals can teach you the basic skills to reduce debt and manage your expenses.

They often offer a suite of services, available through a series of phone or in-person appointments, that are meant to help consumers avoid financial emergencies, manage debt, build credit, achieve financial stability and more.

Cons of Credit Counseling Each agency is different. Not all agencies deliver what they advertise, and some for-profit companies even try to appear similar to nonprofit credit counseling agencies.

Make sure you find a reputable credit counseling agency to help in your debt relief journey. Requires flexibility. Credit counselors aim to offer the best financial advice based on all of the information you share. That means the advice you get may not be what you wanted.

A credit counselor should present you with a clear plan of action, but it may take more time and effort than you expected to reach your goal.

Long-term commitment. If you get set up on a DMP, it could take a few years to pay off all of your debt, and you may have to close all but one of your credit card accounts.

The end-goal of being debt-free is likely worth it, but some consumers lose patience and drop out before they eliminate all their debt. Long-term credit benefits. A debt management program can save you from damaging your credit by avoiding missed payments.

Plus, your scores will improve as you pay down debt balances over time. Budget support. Your credit counselor will help you create an affordable monthly budget that includes your debt payments.

New credit terms. Under a DMP some of your creditors may agree to reduce your monthly payment amount, reduce your interest rate, or forgive certain fees. Cons of Debt Management Plans Time Commitment. Debt management programs typically take years to complete. The counseling agency usually charges an enrollment and maintenance fee to help cover the cost of their services, including processing your payments.

That could include an increase in your interest rates or monthly payments, or reinstated late fees. Short-term drop to credit scores. These points may take some time to regain. Debt Consolidation Debt consolidation involves taking out a new loan or credit to pay off debt. But this option has its own risks and rewards: Pros of Debt Consolidation Options.

You could use a credit card or a personal loan to consolidate debt, by applying for a new account through your bank, credit union or otherwise. Save money. Not only do lower rates save you money but they can also help you pay off debt faster.

Budget relief. If you need budget relief, consolidating could get you into a new, more affordable monthly payment. Cons of Debt Consolidation Credit qualifications. Not everyone is eligible for debt consolidation loans or new credit cards, especially if your credit score has suffered due to missed debt payments or maxed out accounts.

Your new financing will come with its own interest rate and fees. Be sure to do the math and make sure consolidating will save you money. Collateral damage. Some loans require collateral, such as your home or car. Debt Settlement Debt settlement involves negotiating with creditors to pay less than the full amount you owe.

You may pay off debt faster. The process of debt settlement often takes three or more years to complete. That may seem like forever, but for some debtors this could mean being debt free sooner than if they paid off their full debt balances on their own.

Several consumer advocacy agencies caution people against using debt settlement, including the Federal Trade Commission FTC and the Consumer Financial Protection Bureau CFPB. Late Fees. Time Commitment. Damaged Credit. Debt settlement can damage your credit score just as much as filing bankruptcy, and settled debts will remain on your credit reports for seven to ten years.

Credit counselors obtain and maintain professional certifications. These personal finance professionals can teach you the basic skills to reduce debt and manage your expenses. They often offer a suite of services, available through a series of phone or in-person appointments, that are meant to help consumers avoid financial emergencies, manage debt, build credit, achieve financial stability and more.

Cons of Credit Counseling Each agency is different. Not all agencies deliver what they advertise, and some for-profit companies even try to appear similar to nonprofit credit counseling agencies. Make sure you find a reputable credit counseling agency to help in your debt relief journey.

Requires flexibility. Credit counselors aim to offer the best financial advice based on all of the information you share. That means the advice you get may not be what you wanted. A credit counselor should present you with a clear plan of action, but it may take more time and effort than you expected to reach your goal.

Long-term commitment. If you get set up on a DMP, it could take a few years to pay off all of your debt, and you may have to close all but one of your credit card accounts. The end-goal of being debt-free is likely worth it, but some consumers lose patience and drop out before they eliminate all their debt.

Long-term credit benefits. A debt management program can save you from damaging your credit by avoiding missed payments. Plus, your scores will improve as you pay down debt balances over time. Budget support. Your credit counselor will help you create an affordable monthly budget that includes your debt payments.

New credit terms. Under a DMP some of your creditors may agree to reduce your monthly payment amount, reduce your interest rate, or forgive certain fees. Cons of Debt Management Plans Time Commitment. Debt management programs typically take years to complete.

The counseling agency usually charges an enrollment and maintenance fee to help cover the cost of their services, including processing your payments. That could include an increase in your interest rates or monthly payments, or reinstated late fees.

Short-term drop to credit scores. These points may take some time to regain. Debt Consolidation Debt consolidation involves taking out a new loan or credit to pay off debt. But this option has its own risks and rewards: Pros of Debt Consolidation Options. You could use a credit card or a personal loan to consolidate debt, by applying for a new account through your bank, credit union or otherwise.

Save money. Not only do lower rates save you money but they can also help you pay off debt faster. Budget relief. If you need budget relief, consolidating could get you into a new, more affordable monthly payment.

Cons of Debt Consolidation Credit qualifications. Not everyone is eligible for debt consolidation loans or new credit cards, especially if your credit score has suffered due to missed debt payments or maxed out accounts.

Your new financing will come with its own interest rate and fees. Be sure to do the math and make sure consolidating will save you money. Collateral damage. Some loans require collateral, such as your home or car.

Debt Settlement Debt settlement involves negotiating with creditors to pay less than the full amount you owe. You may pay off debt faster. The process of debt settlement often takes three or more years to complete.

That may seem like forever, but for some debtors this could mean being debt free sooner than if they paid off their full debt balances on their own. Several consumer advocacy agencies caution people against using debt settlement, including the Federal Trade Commission FTC and the Consumer Financial Protection Bureau CFPB.

Late Fees. Time Commitment. Damaged Credit. Debt settlement can damage your credit score just as much as filing bankruptcy, and settled debts will remain on your credit reports for seven to ten years. Settlement Fees. Creditors May Refuse. Tax Consequences. Legal consequences.

The lawsuit could result in wage garnishment or frozen bank accounts. Debt Forgiveness In addition to debt settlement, there may be other ways to have some of your debt forgiven.

Here are some of the pros and cons of going this route: Pros of Debt Forgiveness If you qualify for a legitimate loan forgiveness program, you could benefit from having debt forgiven. Cons of Debt Forgiveness Scams. Debt forgiveness scams have become increasingly common since the pandemic, especially student loan scams.

In order to have some of your debt forgiven, you may have to demonstrate that you qualify for help. Some debtors have no viable way to pay back all of their debt.

In this case, the only way to reset your finances may be through a bankruptcy that eliminates most or all of your debt. Stop collectors from calling.

When you file for bankruptcy, the court issues an automatic stay , meaning that creditors will be barred from making collection attempts on your debts through phone calls and letters.

Once you file, creditors will deal exclusively with your attorney and not you. Protect your property. When you file for bankruptcy your creditors must stop all foreclosure and repossession proceedings. You may also be able to protect important assets like your retirement savings and personal items.

Cons of Bankruptcy Credit damage. Bankruptcy is one of the most damaging events for your credit, and it stays on your credit reports for years after you file. This could mean being denied new loans and credit in the near future.

In fact, some options for reducing debt could save you money and help preserve your credit The best solution for you might even include a combination of DIY solutions, budget tools or financing options.

However, the method that is most efficient in paying down your debt while having the smallest impact on your credit is likely the best option for you. How to consolidate business debt. What is identity theft? Definition, how it happens and the different types. Home equity lender reviews: Top 5 for debt consolidation.

Federal workers missed another paycheck today as ripple effects spread. Hanneh Bareham. Written by Hanneh Bareham Arrow Right Writer, Personal Loans and Debt Relief. Hanneh Bareham has been a personal finance writer with Bankrate since She started out as a credit cards reporter before transitioning into the role of student loans reporter.

She is now a writer on the loans team, further widening her scope across multiple forms of consumer lending. Hannah Smith. Edited by Hannah Smith Arrow Right Editor, Personal Loans.

Hannah has been editing for Bankrate since late They aim to provide the most up-to-date information to help people navigate the complexities of loans and make the best financial decisions.

Bankrate logo The Bankrate promise. Bankrate logo Editorial integrity. Key Principles We value your trust. Bankrate logo How we make money. Key takeaways While debt relief solutions may be helpful when organizing and paying down debt, they can easily result in credit or financial damage.

The most common forms of debt relief are debt consolidation, debt settlement and bankruptcy. Borrowers with multiple high-interest debts and good credit score — or a co-signer — who can score a lower credit score or more favorable terms.

Borrowers struggling to pay off their debts or anyone needing financial guidance. Those with high amounts of debt with no other way to pay down their balances. SHARE: Share this article on Facebook Facebook Share this article on Twitter Twitter Share this article on LinkedIn Linkedin Share this article via email Email.

Written by Hanneh Bareham Arrow Right Writer, Personal Loans and Debt Relief Twitter Linkedin Email. Edited by Hannah Smith.

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