We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Are the Different Types of Consumer Debt Relief?

By Crystal Cook
Updated May 17, 2024
Our promise to you
WiseGeek is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGeek, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

There are several options available for consumer debt relief, some of which are riskier than others. Credit counseling can help people learn how to handle their debt. Debt management programs allow a debtor to work with a company to lower debt, while debt settlement can reduce the amount of debt owed. Bankruptcy is an option that can erase certain debts from consumers' records, giving them a fresh start.

Credit counseling can help consumers get out of debt and avoid going into debt again. In this type of consumer debt relief, a professional can meet with the consumer in person or on the phone to help develop a strategy to pay off debt. A credit counseling professional also can help with the creation of a budget that consumers can learn to follow. These professionals also can provide access to educational resources that will help consumers learn more about handling their debt.

Debt consolidation is a type of consumer debt relief that combines debts. A consumer will owe the same amount, but the debt will be combined so only one payment is made every month. This allows a consumer to gradually pay down his or her debt. Consolidation loans are not guaranteed; there is an application process that takes into consideration monthly income, the kind of debt the consumer has and credit history. A big risk is taken when this method of consumer debt relief is used, because a person's home is often used as collateral.

Debt management companies offer another kind of consumer debt relief. These companies consider debts, interest rates, the terms of the consumer's accounts, and various other factors to create a plan. Every month, payment is made to the company, which then pays the debtor's creditors. Creditors may work with debtors to lower fees or interest rates. The plan can take four years or more to complete and using or applying for additional credit is not allowed while in the program.

Debt settlement is an option for those looking for consumer debt relief who cannot handle their debt alone. This option can stop bill collectors from calling. Professionals can work with creditors on debt reduction and, while the amount the creditor will settle for will be less than the full amount owed, it will have to be paid immediately. There can be a negative impact on credit scores, because payment is made to the company handling the deal instead of directly to the creditors, and creditors do not have to accept the agreement. Creditors can still sue the debtor for full payment, and the IRS may consider any forgiven debt as taxable income.

Bankruptcy can grant total debt forgiveness. It is the last resort for those who need consumer debt relief. Expert advice and counseling is required before filing in U.S. bankruptcy court. The court will discharge certain debts, such as medical bills, meaning these do not have to be paid. The bankruptcy will be listed on the debtor's credit report for 10 years, making it potentially difficult to get new credit, jobs, life insurance or a home.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.