Debt Relief

Debt Relief Programs: Conquering Your Debt Problems

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Debt can become a burden that weighs on your psychological and financial well-being. Fortunately, there are several types of debt relief programs that can help ease this burden.

One key is to choose the type of program that is the right fit for your situation. This involves sitting down first and identifying the nature and extent of your debt problems.

How to Tell When You Need Debt Relief

Like a lot of problems, debt becomes more difficult to deal with the farther you let it get out of hand. The earlier you identify a potential problem with debt, the more options you will have for solving it.

Unfortunately, people often don’t realize they need debt relief until they find themselves unable to keep up with their payment obligations. You can still pursue debt relief at this point, but by then you may have already damaged your credit score and amassed a debt burden that will take several years to work off.

Instead of waiting until you can’t keep up with your payments, ask yourself a couple simple questions:

  • Are my bills to pay off debts getting larger from month to month?
  • Is my overall total growing or shrinking over time?

Basically, if debt payments and the total amount you owe are growing rather than shrinking, you are heading for a day when you can no longer keep up. If that’s the case, better to address it now than leave it for when it becomes more unmanageable.

As a first step, you need to identify the extent and nature of your problem. Make a list of all your debts, with three columns for each source of debt: total amount owed, interest rate, and monthly payment. Now, look at your monthly income and budget to see if you can find more room to pay down debt. Finally, check your credit score so you’ll know whether obtaining new sources of credit can be part of your debt relief approach.

Debt Relief Programs and Options

Here are some of the approaches you can take towards debt relief:

  1. Credit card balance transfers. Credit card debt is a very expensive form of debt. You may be able to reduce the interest expense on this debt by shopping for cheaper rates or taking advantage of zero percent balance transfer offers, effectively trading high-interest debt for lower-interest debt.
  2. Debt consolidation loan. Often, a loan may be cheaper than credit card debt, so taking out a loan to pay off card balances can both lower your interest expense and make your debt easier to manage by consolidating multiple monthly card payments into one loan payment.
  3. Debt Negotiation. The people you owe money to may seem ruthless at times, but the truth is that they typically do not want you to default on your debt. They may be willing to work with you on an alternative payment plan, as long as it covers their expenses and demonstrates that you are making a good faith effort to pay off the debt over time.
  4. Credit Counseling. If you can’t work out a solution to your debt problems yourself, you may want to seek the help of a qualified credit counselor. The National Foundation for Credit Counseling can offer you advice on how to find a not-for-profit credit counselor to help you formulate a payment program and budget to work your way out of debt.
  5. Debt management or settlement plans. Besides not-for-profit credit counselors, there are also for-profit companies that offer to take charge of your situation by having you pay them to negotiate with your creditors and manage the monthly payments to them.
  6. Bankruptcy. If all else fails, you can seek protection in bankruptcy court. Under this procedure, a judge will decide how to divide up your resources among your creditors.

As will be discussed in the section below, there are pros and cons to each of these approaches, depending in large part on your financial circumstances.

Pros and Cons of Different Debt Relief Programs

To a large extent, the above approaches are listed in order of severity, with the easiest options on top and the ones with the most negative consequences towards the bottom.

For example, credit card balance transfers are fairly easy to arrange. However, this depends on your having a good enough credit rating to be approved for new credit cards. Also, watch out for the fees associated with some zero-balance transfer offers – in some cases, they can exceed the interest savings. In any case, relying too heavily on balance transfers might hurt your credit rating over time, if you are frequently opening new accounts. Finally, be sure only to use this as a way of paying down debt cost-effectively, and not simply as a way to increase your available credit and thus continue to grow your debt.

As with card balances, debt consolidation loans depend on having good enough credit to be approved by a lender. It can help if you have equity in your home to borrow against, but keep in mind that this puts your home at stake so you’ll have to be very confident in your ability to keep up with payments.

Debt negotiation can be an effective strategy, but it takes a great deal of effort. The main thing to watch out for is to shoot for restructuring your debt (typically, this means having payments stretched over a longer time period) rather than having debt forgiven. Debt forgiveness can have negative consequences on both your credit rating and tax liability.

Credit counseling is a valuable step if you need outside help, as long as you do a little homework to make sure you choose a qualified and reputable organization. Debt management and settlement plans take this a step further – they essentially involve you turning over much of the control of the situation to a company that does this for profit. As tempting as it may be to have somebody else take the reins when you are feeling overwhelmed, this can actually add to what you owe and can also have negative tax or credit rating consequences.

Finally, bankruptcy can help get creditors off your back once and for all, but at the cost of losing both some of your current wealth and access to credit for years to come. Think of this as going cold turkey on debt for the foreseeable future.

How to Proceed with Debt Relief

Debt relief is a battle you have to fight on two fronts – one within your household, and one outside of it.

The battle within your household is to get enough control over your spending so that you are no longer accumulating new debt, and can predict how much you will have available to pay down old debt month after month.

The battle outside is to figure out how to manage payments to your various creditors and if necessary, negotiate better terms with them. As mentioned earlier, taking stock of the sources, amounts, and nature of debt you owe is the first step in figuring out how to approach this. If you do that before debt gets unmanageable or damages your credit, you can start working towards debt relief without heavy long-term consequences.


No matter your situation, we'll find the best solution together. Just a few clicks (or taps) away!