Different Forms of Debt Relief

Credit card debt can often spiral out of control.
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If you are overwhelmed by credit card debt, seeking some form of debt relief may be your best option. If you don't do anything, you will face creditor lawsuits and possible wage garnishment. Being proactive and consolidating your debt, working out a settlement plan with your creditors or entering a debt-management program may be in your best interest. If none of those options works, bankruptcy might be your last option for debt relief.

Consolidation Loan

If your financial situation is not too dire, a consolidation loan may be enough to give you debt relief. High-interest rates on credit cards are often a contributing factor to unmanageable debt. Finding a lower interest credit option, such as a consolidation loan, a home equity line of credit or a zero percent balance transfer offer on a credit card might be enough to help you climb out of your financial hole. If your debt problems are significant or you cannot manage your credit responsibly, simply pushing your debt from one creditor to another may not keep you out of trouble in the long run.


Negotiating directly with your creditors can result in significant debt relief. They are generally more willing to negotiate with you if you have already started missing payments. Although this will result in damage to your credit report, it can provide you with more leverage in your negotiations. At the very least, you should try to negotiate a lower interest rate on your debt. You may be able to negotiate down the amount of your outstanding balance, too. If your creditor agrees to forgive any part of your debt, this amount will be taxable income to you, according to IRS rules.

Debt-Management Program

If you feel you can't handle negotiating with your creditors on your own, you can hire a company to do it for you. Debt-management services try to work with your creditors to create a payment plan to settle your debt. One concern with a debt-management program is that it may cost you a significant amount in fees. There are also no guarantees with such a program. If you decide to work with a debt-management company, the Federal Trade Commission recommends you contact your creditors to ensure they have agreed to the plan before you send in any payments.


Bankruptcy is generally considered the last option for debt relief, but in some cases it can be the most effective. A successfully discharged bankruptcy will wipe out your entire debt balance in as soon as a few months, in the case of a Chapter 7 bankruptcy. Discharged debt is also not taxable, as canceled or forgiven debt is. However, your credit report will reflect your bankruptcy for up to 10 years.

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