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Dealing with unmanageable debt can leave you feeling like Sisyphus, the figure in Greek mythology who was condemned to keep rolling a boulder up a hill without ever reaching the top.

If you're having trouble making progress on your debt, maybe because of high interest costs, debt relief can help get you over the hill.

Medical bills, credit card bills, student loans — there are several different types of debt, and also various ways to restructure, consolidate and negotiate it away. Those all fall under the category of debt relief.

If you've got more debt than you can handle, just take a deep breath. You're not alone, and you have several options.

The types of debt relief programs available

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Debt settlement

In debt settlement you stop paying your bills and instead make a single, smaller monthly payment to a debt settlement company.

Debt settlement companies use that money to build up lump-sum payments that it will offer to your creditors. Usually, the amounts are much less than what you owe, but some creditors are willing to take what they can get.

An example of how debt settlement works: Let's say you have a $10,000 credit card debt. Your debt settlement company will negotiate with your creditor or credit card company, "Hey, my client may not ever pay off the whole balance, but we have $7,500 in hand right now. Will you take that instead, and forgive the rest?"

It's a risky way to settle your debt. Sometimes it works out, sometimes it doesn't.

It depends on whether your creditors are willing to work with debt settlement companies — which is something you need to find out before you sign up with one.

What to watch out for: Unsurprisingly, creditors don't like it when you quit paying your bills. It's likely you'll be hit with late fees and/or accumulating interest. Your debt could go to collections, you could be sued for repayment, and your credit scores could tumble.

Debt settlement companies charge their own fees, so you might have to pay 15% to 25% of either your original debt or any forgiven debt. That means if you have $20,000 in debt and it's knocked down to $12,000, you could face fees ranging from $1,200 to $5,000.

Another thing to consider is that debt settlement has become prime territory for scam artists. Do your homework, be skeptical of companies that promise things that are too-good-to-be-true, and never pay upfront fees. They're illegal.

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Debt consolidation programs or debt relief loans

Debt consolidation is a way to restructure debt by rolling multiple balances into one neat little debt package.

An example of how debt consolidation works: Let's say you have $25,000 in medical, student loan and credit card debt. You're swamped. It feels like the monthly interest alone is costing you the GDP of a small European country.

So, you take out a $25,000 loan — maybe a fixed-rate personal loan, or a home equity line of credit (HELOC) against the value of your home — and in one fell swoop, you pay off the pile of bills. Woo hoo! Now you have to pay just one loan with one interest rate. No more jugggling debts with different due dates.

Another form of debt consolidation is through a balance transfer credit card, which allows you to transfer debts onto a single credit card with a low or 0% APR.

Before you apply, make sure your debt is transferable. You won't be permitted to move balances from one credit card to another if they both came from the same bank.

What to watch out for: Balance transfer cards often charge fees for transferring a balance, and their low "teaser rates" are temporary, lasting less than two years.

Keep in mind that longer-term loans usually have higher interest rates, and rates can get even steeper if you ask for a loan extension. So have a plan in place to repay that juggernaut within the loan's term.


Bankruptcy is the big kahuna among debt relief options, because of its ability to eliminate debt. Bankruptcy — Chapter 7 or 13 for individuals — is a legal process in which you apply to have your debt either completely or partially forgiven.

How bankruptcy works: Chapter 7 bankruptcy is the most common form of personal bankruptcy and can wipe away most unsecured debts not backed by collateral. You might be required to let some assets, like jewelry, be sold off, though this is relatively rare.

In Chapter 13 bankruptcy, your debts are restructured, and you're put on a three-to-five-year repayment plan. When that time is up, any remaining balances may be canceled.

Chapter 7 is intended for people who don't have the income to repay their debts. Chapter 13 is often called "wage earner's bankruptcy" and is meant for consumers with regular incomes. Either type can cost hundreds or even thousands of dollars in filing and attorney fees.

What to watch out for: Be prepared for your credit score to tank by at least 200 points when you declare bankruptcy. Bankruptcy also stays on your credit report for a really long time: 10 years for Chapter 7, and seven years for Chapter 13.

You can slowly start rebuilding your credit with secured credit cards shortly after declaring bankruptcy, but it could be difficult to get a car loan or mortgage for several years.

Is debt relief the solution for you?

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Debt relief measures aren't for everyone. Your credit can take a hit and, depending on the route you choose, you could wind up with even more debt.

But if you've been struggling with a heavy boulder of debt for years, you do have a few ways to shrink it or even roll it away. Just understand that they all have pros and cons.

Everyone deserves the peace of mind that comes with reaching a comfortable financial situation. If you’ve budgeted every aspect of your finances and your debt is still unmanageable, don't let any stigma prevent you from reaching out for help so you can live a full and happy debt-free life.