Debt Relief: Options, Considerations and How It Works
Debt relief changes the terms or amount of your debt to help you pay it off. Learn about bankruptcy, debt management, debt relief programs and other options.
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Thirty-five percent of Americans have “pay off/down debt” on their list of financial goals for 2025, according to a new NerdWallet survey of over 2,000 adults, conducted online by The Harris Poll.
If debt reduction is on your list but feels overwhelming, debt relief can help reduce or restructure your debt so it’s easier to pay it down. The right option depends on your situation and may involve negotiating with your creditors, a debt management plan or bankruptcy.
For input from Redditors: We sifted through Reddit forums to get a pulse check on how users feel about debt relief options. We used an AI tool to help analyze the feedback and then summarized insight. People post anonymously, so we cannot confirm their individual experiences or circumstances.
What is debt relief?
The term "debt relief" can mean different things, but generally the main goal of any debt relief option is to change the terms or amount of your debt so you can get back on your feet faster.
Debt relief could involve:
Negotiating with creditors to settle debt for less than the full amount.
Using a debt management plan to get a lower interest rate or different payment schedule.
Wiping out the debt or creating a repayment plan in bankruptcy.
» Dive deeper: Tips and strategies to pay off debt
When is debt relief a good idea?
Consider DIY debt relief, bankruptcy or debt management when either of these is true:
You have no hope of repaying unsecured debt (credit cards, medical bills, personal loans) within five years, even if you take extreme measures to cut spending.
The total of your unpaid unsecured debt (excluding student loan debt) equals half or more of your earnings.
» Have college debt? Learn about student loan debt forgiveness programs
What are some common debt relief options?
Do-it-yourself debt relief
You can skip a formal debt-relief program and handle debt on your own through a combination of stricter budgeting, credit counseling, debt consolidation and appeals to creditors.
For example, you can do what credit counselors do in debt management plans: Contact your creditors, explain why you fell behind and ask if they’ll lower your interest rate and waive fees while you catch up. Most credit card companies also have hardship programs.
You can also educate yourself on debt settlement, contact your creditors and negotiate an agreement.
If your debt isn’t too large and your credit score qualifies, you may be able to move debt from a higher-interest credit card to a card with a 0% introductory annual percentage rate, or APR. Or you may find a debt consolidation loan with a lower interest rate than you're paying now.
Those options won’t hurt your credit — as long as you make the payments by the end of the promotional period, your credit score should rebound. But if you do this, it’s important to avoid adding more credit card debt.
What Redditors say: Users emphasize that you should pay attention to balance transfer fees, make sure you can pay the debt off before the no-interest period ends, and confirm that you qualify for the card before you apply.
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Debt management plans
A debt management plan allows you to pay your unsecured debts — typically credit cards — in full, but often at a reduced interest rate or with fees waived. You make a single payment each month to a credit counseling agency, which distributes it among your creditors. Credit counselors and credit card companies have agreements in place to help debt management clients.
Your credit card accounts will be closed and, in most cases, you’ll have to live without credit cards until you complete the plan.
Debt management plans do not affect your credit scores, but closing accounts can hurt your scores. Once you’ve completed the plan, you can apply for credit again.
Missing payments can knock you out of the plan, though. And it’s important to pick an agency accredited by the National Foundation for Credit Counseling or the Financial Counseling Association of America.
What Redditors say: Users suggest confirming that the agency you’re working with is really a nonprofit, as well as looking the company up with your state's attorney general’s office and with consumer protection agencies.
Debt relief through bankruptcy
If you’re not going to be able to make the payments on a debt management plan, bankruptcy is an option, but talk with a bankruptcy attorney first. Initial consultations are often free, and if you don’t qualify, you can move on to other options.
Chapter 7 bankruptcy
The most common form of bankruptcy, Chapter 7 liquidation, can erase most credit card debt, unsecured personal loans and medical debt. It can be done in three or four months if you qualify.
What you should know about Chapter 7:
It won’t erase child support or alimony obligations.
It will hurt your credit and stay on your credit report for up to 10 years. But if your credit is already damaged, it may allow you to rebuild sooner than if you keep struggling.
Your bankruptcy filing will make any co-signers solely responsible for the debt.
You can’t file another Chapter 7 bankruptcy for eight years.
It may not be the right option if you’d have to give up property you want to keep. The rules vary by state.
It may not be necessary if you don’t have any income or property a creditor can go after.
Chapter 13 bankruptcy
Not everyone with overwhelming debt qualifies for Chapter 7. If your income is above the median for your state and family size, or you have a home you want to save from foreclosure, you may need to file for Chapter 13 bankruptcy.
Chapter 13 is a three- or five-year court-approved repayment plan, based on your income and debts. If you are able to stick with the plan for its full term, the remaining unsecured debt is discharged.
If you are able to keep up with payments (a majority of people are not), you will get to keep your property. A Chapter 13 bankruptcy stays on your credit report for seven years from the filing date.
What Redditors say: Users stress the importance of seeing a bankruptcy attorney before moving forward, to make sure you’re eligible and know what to expect.
» Learn more: When bankruptcy is the best option
Debt settlement or debt relief program: A risky last resort
Debt settlement is an option for those who face overwhelming debt but are unable or unwilling to file for bankruptcy.
Debt settlement companies typically ask you to stop making debt payments when you enroll in a settlement plan and instead put the money in an escrow account, the Consumer Financial Protection Bureau says.
As the money accumulates in your account and you fall further behind on payments, the debt settlement company asks your creditors if they’ll accept a smaller lump-sum offer.
Why this option is risky
You could end up with even bigger debts as late fees, interest and other charges balloon.
This also can result in collections calls, penalty fees and, potentially, legal action against you, which can lead to wage garnishments and property liens. Settled debts may also be taxed as income.
The CFPB, the National Consumer Law Center and the Federal Trade Commission caution consumers about debt settlement in the strongest possible terms. Some debt settlement firms advertise themselves as debt consolidation companies, which they are not.
What Redditors say: Some users say they’ve been successful using debt relief programs, but others have had negative experiences. Criticisms include high fees, damage to credit scores, risk of lawsuits from creditors and the fact that your accounts go into delinquency as part of the process.
Debt relief scams to watch out for
Debt relief may give you the new start you need to make real progress. But the debt relief industry includes scammers who may try to take what little money you have.
Be sure you understand — and verify — these points before entering any agreement with a debt settlement company:
What you need to qualify.
What fees you will pay.
Which creditors are being paid, and how much. If your debt is in collections, make sure you understand who owns the debt so payments go to the right agency.
The tax implications.
Whether the company you choose works with the creditors you owe.
Avoid debt relief programs that do any of the following:
Make you pay a fee before your debt is settled.
Guarantee a “too good to be true” price for paying off your debt.
Assure you that it can stop all lawsuits and calls from debt collectors.
What Redditors say: Users report debt relief program red flags like large upfront fees, unrealistic claims, pushy marketing techniques and claims they can get (accurate) negative information off of credit reports.
Debt relief options to avoid
Even if you’re feeling overwhelmed by debt, avoid these actions if possible:
Don’t neglect a secured debt (like a car payment) in order to pay an unsecured one (like a hospital bill or credit card).
Don't borrow against the equity in your home — it puts your home at risk.
Avoid borrowing money from workplace retirement accounts. If you lose your job, the loans can become withdrawals and trigger a tax bill.
Don’t make decisions based on which collectors are pressuring you the most.
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