Got credit card debt? You aren’t alone. In the second quarter of 2025, total credit card debt in the U.S. reached a record high of approximately $1.21 trillion, up 5.9% from the previous year. If you’re struggling, you may have thought about debt relief programs. But knowing what they are – and how they work – can be confusing.
WHAT EXACTLY ARE DEBT RELIEF PROGRAMS?
Debt relief programs are offered by companies that renegotiate, settle, or otherwise adjust the terms of your unsecured debt with creditors or collectors. They’re also known as debt settlement or debt adjusting companies.
These programs aim to help you settle your debt for less than the full balance — often by making a lump-sum payment or a series of reduced payments in exchange for having part of what you owe forgiven. It could also mean debt consolidation, which involves combining multiple balances in one loan, ideally with a lower interest rate.
Often, debt relief programs will also work with creditors to negotiate more favorable terms, such as lower interest rates and reduced monthly payments.
IS A DEBT RELIEF PROGRAM RIGHT FOR YOU?
We recommend debt relief programs only when other, often better, options won’t work. For example, credit counseling may be the smarter choice if you’re struggling but haven’t yet missed payments.
Sometimes, the help of a financial professional can make all the difference. Take Ben Bolen, a CFP with University Investment Services, for example, who helped a client through some crippling debt. Alongside his client, he started contacting each creditor directly. “We asked about potential deferral of the debt and if we could negotiate the debt, as many will accept a reduced amount,” explains Bolen. “Doing this prevented the debts from going to collections, where fees can amass quickly, or to a judgment, which is very damaging to a credit report.” With that groundwork, they created a payment plan that fit the client’s budget.
But if those options don’t apply, and you have substantial unsecured debt (generally $7,500 or more) and are already behind on payments, debt relief programs may be worth considering.
TOP COMPANIES TO CONSIDER
Many debt settlement companies are reputable, but some overcharge or scam vulnerable consumers. That’s why it’s so important to find a company with a good track record.
Here are a few of our top-rated picks, all of which have A+ ratings with the Better Business Bureau:
- Established in 2002
- Has served over 1 million Americans, settling over $20 billion in debt
- A+ rating on Better Business Bureau
- Low monthly payments and no upfront fees
- Free, no-obligation evaluation
- Best for those with $20,000 or more in debt
- Established in 2011
- A+ rating on Better Business Bureau
- Free, no-risk consultation
- No upfront enrollment fees
- Best for those with $20,000 or more in debt
- Established in 2009
- No upfront fees
- A+ rating by the Better Business Bureau
- Free, no-risk consultation
- Best for those with $10,000 or more in debt
WATCH OUT FOR THESE RISKS
Debt relief programs carry risks, especially if you choose the wrong company. According to the Consumer Financial Protection Bureau (CFPB), these are some of the main drawbacks to be aware of:
- Fees can be steep, often a percentage of the debt, plus possible monthly maintenance fees.
- Some creditors refuse to work with certain programs.
- While debt relief programs might claim to work miracles, in many cases, they will be unable to settle all your debts.
- Most programs require you to stop paying your debts to encourage negotiation, which can create issues. “This can have a negative effect on your credit score and may result in the creditor or debt collector filing a lawsuit while you are collecting funds required for a settlement,” explains the CFPB. Plus, if you stop making payments on a credit card, late fees and interest will be added each month, causing your original debt to increase.
WHAT TO KNOW ABOUT TAXES
The CFPB also warns that there could be consequences for debt forgiveness. For example, “if a portion of your debt is forgiven by the creditor, it could be counted as taxable income on your federal income taxes,” the CFPB explains.
Before enrolling in a debt relief program, it’s a good idea to talk with a tax professional to understand how forgiven debt will impact your tax return.
THE BOTTOM LINE
Debt relief programs can provide breathing room, but they’re not without cost or risk. Before signing up, make sure you understand the fees, the potential credit impact and how the program fits into your overall financial plan.
MORE ON HERMONEY:
- How To Pay Down Credit Card Debt And Heal Your Money Story
- Which Budgeting Method Can Help You Become Debt Free The Fastest?
- How The Coupon Lady Found Herself In Debt
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