Debt solutions: understanding your options

By Rebecca Lake

Reviewed by Kimberly Rotter

Aug 06, 2023

Read time: 7 min

Happy family with two daughters hugging their mother and bonding at home.

Key takeaways:

  • There are different debt solutions for managing different debt situations. 

  • Debt consolidation and debt management plans can streamline monthly payments. 

  • Resolving your debt can help you pay back less than what you owe.

Life is an adventure. Sometimes, unforeseen circumstances can lead us down a path of financial challenges—and into a lot of debt.

Know this. There's always a way forward, even in the face of uncertainty.

Some debt solutions require good credit; others don't. Some options cost less than others. And some options are quicker than the alternatives. The path out of debt might not look the same for everyone, but it starts with embracing the mindset that financial progress is possible. 

With the right information and the willingness to do your part to improve your financial situation, you can conquer your debt challenges and get on the road to a brighter future. Let's look at different debt solutions and when to consider them.

Exploring debt solutions

A debt solution is any solution that helps you get a better handle on your debt so you can pay it off. There's more than one way to solve an overwhelming debt problem, depending on where you are financially.

Here's how four different debt solutions compare. 

Debt consolidation 

Debt consolidation lets you combine multiple debts. Consolidating debt doesn't reduce your debt but can help you reduce multiple monthly bills to one manageable payment. 

A personal loan might be a good option if your credit is good enough to qualify, and the loan would be big enough to help you streamline your debts. Personal loans are generally repaid in 2-5 years.

Read more: How to use a personal loan for credit card debt

A home equity loan might be the best path forward if you have enough equity to borrow against and you need a larger loan. Home equity loans are typically repaid in 10 to 30 years.

Read more: When does it make sense to use a home equity loan to pay off debt?

Credit card balance transfers are a third option. If you qualify for a balance transfer offer at zero percent or very low interest, you could save money and make faster progress against your debt. When you don't have to pay interest, your entire payment goes toward the balance that you owe, and that can help you get rid of debt faster. 

But there's a risk of charging those paid-off credit cards back up again while you're paying off the balance on the new card. Balance transfers can turn into a juggling act that leaves you with more debt than when you started. It's best to consider this a one-time strategy that's part of a bigger plan to address the debt.

Paying off a transferred balance can take years or even decades if you only make the minimum payment.

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Debt management plan

A debt management plan (DMP) is an agreement between you and your creditors to pay off debts in full according to a set schedule. You can set up a debt management plan with the help of a credit counselor. You make one payment to the credit counseling agency each month, which then pays the money out to your creditors. 

A DMP can help you pay off your debt if you stick with it. And it can also save you money if your creditors are willing to cut you a break on interest rates and fees. 

DMP monthly payments are typically high compared to credit card minimum payments. Also, you'll be expected to stop using credit while you're in the DMP. Most DMPs last for 3-5 years. If you miss a payment, your creditors may pull out of the agreement.

Debt resolution

Resolving debt means paying it off for less than the full amount you owe. Any remaining balance is forgiven. 

You'll need to do some negotiating with your creditors to get them to agree to accept less than the total amount owed. You can negotiate yourself or hire a professional debt resolution company to do it for you. One advantage the pros have is existing relationships with most creditors. They might be able to get better results than you could get on your own.

Resolving debt may be the best debt solution if you've fallen behind on your monthly payments. Creditors are usually only willing to resolve debt if you're experiencing a financial hardship and can't afford to repay your debt without some degree of forgiveness.  

A debt resolution program can typically be completed in 2-4 years.

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Either one can get creditors off your back if you're being threatened with a lawsuit for credit card bills, loans, or medical bills. The catch is that in a Chapter 7 bankruptcy, you might have to give up some of the things you own, and in a Chapter 13 bankruptcy, you have to give up all of your disposable income for 3-5 years.

Different debt, different solutions

The type of debt you have matters when you weigh your options. The debt solution you choose can have different consequences. 

For example, let's say you have a pile of medical bills to pay from a bicycling accident you were involved in. Your options for dealing with it could include working out a payment plan, negotiating the balance down, and applying for financial assistance from the hospital or Medicaid. 

But what if you put your emergency dental work on a credit card and now you're struggling to pay it off? You're likely past the point where you can negotiate prices or a payment plan with the care provider. And the interest rate may be so high that your payments are barely scraping away at the balance.

The point is, it's all about tailoring the debt solution to the type of debt you have and your financial ability to pay it off. Here are some possible solutions you might consider for different types of debt. 

  • Credit card debt: debt consolidation, debt management plan, debt resolution

  • Medical debt: payment plans, negotiation, debt resolution

  • Federal student loans: direct consolidation loan through the Dept of Education

  • Mortgage debt: mortgage refinance loan, loan modification

  • Auto loan debt: refinance loan, debt resolution

If you owe child support, your only recourse is to pay it off. If you don't make any effort to pay, the court could order a wage garnishment. 

With federal tax debts, options include payment plans and an "offer in compromise" (a negotiated agreement to pay less than the full amount you owe). State tax agencies offer similar solutions for state tax debts. 

Avoiding scams

When you're deep in debt, you can become a target for scammers. There are, unfortunately, lots of people out there who are willing to dupe you out of money using the promise of financial freedom and relief from debt. 

Knowing how to spot a debt solution scam can make them easier to avoid. Some of the most common giveaways include:

  • Promises or claims that seem too good to be true

  • Lack of transparency about fees or how a debt solution works

  • Pressure to send payment before any help is offered

  • Unsolicited requests for personal and financial information

  • Any behavior that seems like it's designed to intimidate or frighten you into handing over your money

  • No information on trusted websites like the Better Business Bureau or TrustPilot.

You can protect yourself against debt solution scams by doing your research. If you're considering resolving debt, for example, then it's worth your time to look for a reputable company to work with. A legitimate company will offer a free debt consultation and help you understand all of the possible solutions for dealing with your debt, including the ones they don't offer.

Tips for choosing the right debt solution

When you're mired in debt, it's hard to imagine a way out. These steps can help you choose the best debt solution for you.

  • Take a debt inventory. Know what you owe. If you haven't done so yet, create a debt inventory that lists each of your creditors, your balances, your monthly payments, and the interest rates. You can group debts by category, i.e., credit cards, medical bills, secured debts, etc. 

  • Make a list of assets you want to keep. What and how much you own could influence your choice of debt solution. For instance, you can only keep certain property in bankruptcy, and it depends on what state you live in. Even if you're not considering bankruptcy, you could still risk losing a vehicle or other assets if they are legally tied to your debt. 

  • Evaluate your budget. The amount of money you can afford to put toward debt repayment can help you choose a path forward. Take some time to go over your income, bills, and spending. It's possible that you might already have the money you need to pay off your debt, but you just have to get organized to find it. 

  • Get professional help. Get a free debt evaluation or consult with a debt consultant to get an expert opinion on how to handle your debt. A debt consultant can evaluate your financial situation and guide you toward the solution that's the best fit for your needs and goals.

Paying off debt can get you one step closer to financial freedom. Once you choose a plan and get started, you can build momentum. And remember that celebrating even the smallest of wins along the way matters if it keeps you motivated to stick with your debt-free journey.

Rebecca Lake - Author

Rebecca is a senior contributing writer and debt expert. She's a Certified Educator in Personal Finance and a banking expert for Forbes Advisor. In addition to writing for online publications, Rebecca owns a personal finance website dedicated to teaching women how to take control of their money.

kim rotter 2022 2

Kimberly is Achieve’s senior editor. She is a financial counselor accredited by the Association for Financial Counseling & Planning Education®, and a mortgage expert for The Motley Fool. She owns and manages a 350-writer content agency.

Frequently asked questions

There is no government forgiveness for credit card balances, medical bills, or other debts. 

Federal debt forgiveness exists for federal student loan debts. Forgiveness programs only extend to federal student loan borrowers who meet certain requirements. You can learn more at

Debt solutions can include debt consolidation, debt management, debt resolution, and bankruptcy. The solution that you choose depends on what type of debt you have, how much you owe, and your overall financial situation.

If you need help with debt, it may be worth talking to a financial professional. A debt consultant can look at your budget and debts and tell you what options might be most appropriate for your situation. You can find one here.

If you want help learning to manage your debt and your payments, you can talk to a nonprofit credit counselor. Look for one certified by the NFCC or the AFCPE. Counseling agencies can provide free or low-cost help with getting a grip on your finances.

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