Getting out of debt, cheapest and safest first
Being behind is a math problem, not a character flaw. Start with the no-cost option.
- A nonprofit credit counselor reviews your budget at no cost and can set up a plan.
- Consolidation helps only if the new rate is truly lower than what you carry now.
- Paid settlement is a last resort. The forgiven amount is usually taxed as income.
- No one can promise a result. By law, a real settlement firm can't charge you until a debt is settled.
Put a real number on it
Sources: CFPB on counseling, CFPB on settlement fees, and IRS on canceled debt. Run the settlement numbers →
The options, cheapest and safest first
Each one, how it works and what it really costs you.
Credit counseling
A nonprofit reviews your budget at no cost and can roll debts into one lower-rate plan. Usually the first call.
Debt consolidation
One new loan or balance transfer pays off the rest. Saves money only if the rate really drops.
Debt settlement
Pay less than you owe. It works by being unpleasant: a credit drop, calls, possible lawsuits, and a tax bill.
Bankruptcy
The legal reset. Sometimes the honest math when nothing else closes. It clears a lot, but not everything.
Side by side
| Option | Typical cost | Credit impact | The catch |
|---|---|---|---|
| Credit counseling | No or low cost; plan fees may apply | Low / neutral | Needs a steady budget Start here |
| Consolidation | Interest + fee | Low | Only helps if the rate drops |
| Settlement | Often 20–25%+ of enrolled debt | Sharp drop | Possible tax on forgiven debt |
| Bankruptcy | Filing + attorney | Sharp drop, 7–10 yr | Public record; not all debt clears |
For the right person, settling for less can beat years of minimum payments that never touch what you owe. You still deserve the whole picture first.
Your credit drops, because you go delinquent on purpose. Creditors can keep calling, and can sue you, while you wait. And the forgiven part is usually taxed as income — wiping out $10,000 can come with a tax bill on the forgiven amount.
✓ Settlement is worth weighing if
- You're deep in unsecured debt with no realistic path to pay in full.
- You're already behind, or about to be.
- You've compared all four options above and this one still wins.
✕ Look elsewhere first if
- You can cover more than the minimum payments.
- The debt is secured — a car or house won't settle this way.
- A no-cost counseling plan would get you there without the credit hit.