Debt Relief Options

There are several professional debt-relief options are available to help you reduce or even get rid of your debt in a consistent and logical manner.

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What is the best debt relief option for you. Our infographic will help you understand the pros and cons of each optionWhile many of us succeed in dealing responsibly with our debts, falling into unmanageable debt is an all too common occurrence for a lot of people. Some heavily indebted individuals have spent imprudently while others are victims of circumstances beyond their control like unemployment, medical emergencies or unforeseen changes in a family situation.

High monthly payments for credit cards, mortgages and student loans become weights around our necks. These debts force us to live paycheck to paycheck; always worrying the next phone call will be from a creditor demanding we finally pay up or watch our earnings dwindle from wage garnishments.

Luckily, several professional debt-relief options are available to help you reduce or even get rid of your debt in a consistent and logical manner.

Professional debt relief solutions include:

These services come with a price because they are complicated, and involve plenty of paperwork and terminology most of us are unfamiliar with in our daily lives. Many debtors turn to financial professionals for help with debt -- from calling lenders for lower rates, refinancing a home or simply creating a strict budget and sticking to it.

Services Often Left to a Professional

While you can handle debt-relief solutions yourself, some options are often left to a professional.

Debt Settlement

Also known as debt negotiation or debt resolution, debt settlement involves you or a debt settlement company negotiating lump-sum settlements with your creditors. The object is to decrease the principal you own while also eventually retiring the debt.


  • Expertise. Debt settlement companies often have experience negotiating with creditors.
  • No Surprises.  You won’t find a hidden surprise or something you might miss if you tried settling debts yourself.


  • Finding the Right Company. Not all debt settlement companies are the same. You will have to do your research to find a reputable, professional and successful company.
  • Costly. Hiring a debt settlement company can be expensive. They often will charge a percentage of the debt you need settled or an agreed-upon percentage of the amount saved through settlement.

Debt Consolidation

Debt consolidation means taking out a loan, which you use to consolidate and pay off all your other debts. The object of debt consolidation is to reduce interest rates and combine all of your debts into one manageable, monthly payment.


  • Expertise. Debt consolidation companies are trained to find you the lowest monthly payment available by negotiating with lenders. Most experts are required to obtain a certification qualifying them to do so.
  • Experience. Trustworthy debt consolidation companies have experience dealing with lenders.


  • Cost. The most successful debt consolidators will likely require a percentage of the amount they save you.
  • Finding a Dependable Company. It takes time researching a dependable and experienced debt consolidation company. Look for companies with more than five years of experience.

Debt Management

Unsecured debts such as credit card bills, medical bills, student loans, department store cards and unsecured lines of credit can be handled through a debt management program (DMP). The object is to reduce your monthly payments by getting a reprieve from interest rates, late fees or penalties from your creditors while promising to pay back the full principal over time.


  • Efficient and Organized. Under a DMP, you have the ability to take care of your debt more efficiently than if you tried to sort it out yourself because of an organized monthly payment plan.
  • Improve Your Credit Score. A DMP will keep your payments on track and can ultimately improve your credit score.
  • Creates a Realistic Budget. The DMP will help you understand your expenses, making it easier to create and maintain a monthly budget.


  • Cost. There is usually an enrollment and maintenance fee.

Credit Counseling

Another system of debt management is credit counseling. You work with a credit counseling agency that reviews your budget and helps you evaluate all of your debt relief alternatives.


  • Free. Many credit counseling services are nonprofit organizations and may provide counseling sessions at no cost. However, some organizations are for-profit companies and do require fees.
  • Certified Counselors. Most reputable credit counseling organizations employ certified counselors ready to arm you with the skills to help manage your debt and create a practical budget.
  • It’s More Than Just a Phone Call. Credit counseling often requires multiple phone calls to really sort out your finances and create and maintain a budget.


  • Do Your Research. Not all credit counseling organizations provide certified counselors.


If circumstances are especially dire, you can file for either a Chapter 7 bankruptcy, which cancels your debts, or a Chapter 13 bankruptcy, which sets up a years-long repayment plan. The goal of bankruptcy is to give you a fresh start from your debt burdens.


  • Professionals Understand Legal Jargon. Filing for bankruptcy requires constant contact with court officials, trustees who review your case and creditors. Dealing with legal issues and terminology can be stressful.
  • Protection from Creditor Harassment. Even if you file for bankruptcy yourself, creditors, by law, can still contact you. However, if they know you’ve hired a bankruptcy attorney, they contact that person directly.
  • Help with Paperwork. Let a professional file bankruptcy petitions and schedules. It’s easy to make mistakes, potentially changing the outcome of your future, if you’re not familiar with the legal terms.


  • Attorney Costs. If you’re filing for bankruptcy, money is already tight and attorneys are not cheap.
  • Additional Legal Fees. In addition to paying a bankruptcy attorney, there are court filing fees, paralegal fees, bankruptcy trustee fees, photocopying charges and consumer counseling fees.
  • Finding an Attorney. Doing your research and asking for attorney referrals from friends and family members can be daunting.

Services Consumers Often Handle on Their Own

There are a number of debt relief services that you are more than capable of handling yourself.

Tracking Your Spending

If you’re not sure how much you spend on daily living expenses, including groceries, personal items and transportation, it might be time to start tracking your spending. If you don’t take the time to track where your money is going and make any necessary changes according to your budget, then you are in danger of growing your debt.


  • It’s Free. This is especially important if you have accumulated at least some debt and are already short on cash.
  • Keeps You Aware. You’ll have a better grasp on where you stand financially.
  • Helps You Stick to a Budget. Creating a reasonable budget and sticking to it is much easier when you’re in control of tracking all your finances.


  • Room for Error. If you manually track your spending, you could forget to log an expense in your budgeting document, which could hurt your financial plan.
  • Time Consuming. Takes too much time to add every expense at the time of purchase.

Using Budgeting Software

Budgeting software is not just for large companies, as some may think. There are lots of options and tools made for individuals to stay financially responsible.


  • Convenience. Rather manually adding up all your expenses in your checkbook, budgeting software can keep a virtual log and deduct purchases from available income. Some smartphone apps also can also simplify budgeting.
  • Accuracy. Budgeting software uses tools, such as built-in calculators and automated alerts keep your spending habits more accurate than if you were to track spending on your own.


  • It Costs Money. Budgeting software like Microsoft Excel is expensive. There are a few free budgeting apps on the market, but accessing many of the better features carries a fee. Those costs can add up.
  • There’s a Learning Curve. Some budgeting software and apps might require specialized training to operate them correctly and efficiently.

Refinancing Your Mortgage

When you refinance your home, you are paying off an existing mortgage and creating a new one. This may be an option for you if your home is underwater or if mortgage rates are especially low. If you do your research and find a trustworthy lender, you should be able to refinance your mortgage.


  • Saves You Money. Although there are fees involved with refinancing your mortgage in general, by doing the legwork yourself, you are saving yourself the cash you’d have to pay a professional.
  • A Learning Experience. Not too many people know the logistics of refinancing their home. This is why it may be tempting to hire a professional, but by going through the process yourself, you can learn valuable information about your home and finances.


  • Takes Time on the Phone. The legwork to refinancing mortgage can be tiring.
  • Research, Research, Research. You must dedicate a fair share of your time researching options that work best for you, including mortgage modification, working with original lender, finding a new lender and taking cash out when refinancing.
  • Lots of Paperwork. Applying requires a lengthy loan application that includes a complete review of your finances and employment history. Often, you must provide documentation such as recent income tax returns, pay stubs, proof of checking and savings account and any investments you may have.

Renegotiating Your Credit Card Bills

Credit card companies sometimes will negotiate terms for you. They are more flexible than we tend to think.


  • Significant Savings. By renegotiating your Annual Percentage Rate (APR), you will have a lower, more affordable monthly payment.
  • Just a Phone Call Away. It’s as simple as calling your credit card company’s toll-free phone number.


  • Knowing What to Ask. Although making the call is easy, knowing what to say and ask might be complicated. If you say, “I want to renegotiate my credit card bills,” it’s not going to do you much good. Research your options, such as lump-sum settlement or working out an arrangement.
  • Know the Consequences. Since you won’t have someone to explain how each option works for you, know all the consequences before agreeing to a solution.

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Bill Fay
Staff Writer

Bill Fay is a journalism veteran with a nearly four-decade career in reporting and writing for daily newspapers, magazines and public officials. His focus at is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at


  1. Federal Reserve Board. A Consumer’s Guide to Mortgage Refinancings. Retrieved from
  2. Federal Trade Commission. (2012, Nov.) Consumer Information: Settling Credit Card Debt. Retrieved from
  3. Federal Trade Commission. (2012, Nov.) Consumer Information: Coping with Debt. Retrieved from:
  4. Internal Revenue Service. Publication 936 - Main Content. Retrieved from:
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