Comparing Top Debt Relief Options

If you are struggling to make all your payments or are unable to get out of debt – seeking professional debt relief help can be a good idea. A debt relief firm can provide you with repayment concessions. Repayment concession can come in many forms and may include a lower interest rate, reduction of balance, and debt forgiveness.

Most debt relief plans (debt settlement, consolidation, and management) can help you with credit card, medical, personal loans, and collection debt. These debts are unsecured debts - meaning there is no asset attached to them and your creditors can not take your property. The exception is bankruptcy which may provide help with your essential secured assets.

Examples assume $26,000 owed Credit Counseling Debt Settlement Chapter 13 Bankruptcy Chapter 7 Bankruptcy
Monthly Payment % of Debt 3% 1.6% Varies - usually 100% of disposable income (income less essential livings and other costs) Not Applicable
Monthly Payment Amount $780 $406 Varies Not Applicable
2 Years $7,304 $3,652 $3,652 $18,366
Upfront Fees $50 $0 $1,500 to $3,000 - attorney fees can vary significantly $500 to $3,500 - attorney fees can vary
Typical Program Length 5 Years 4 Years 5 Years 6 Months
Financial Benefit Modest repayment plan by lowering interest rates to 10% Provides short term relief a low monthly payment and long term relief with avg. term of 48 months. Varies based on disposable income computation. May be better fit than settlement if future income is expected to significantly decline. Forgives most unsecured debts, like medical bills, credit card debt and personal loans. May have to give up assets like car and jewelry.
Total Payments (Including fees) $32,920 $19,500 $18,600 $500 to $2,500
Qualification Min. $2,500 in unsecured debt At least $10,000 in unsecured debt and regular income Must document and disclose disposable income and expense to court 14 days before filing. Hearing determines if plan is acceptable. Must document income and expenses for court. Typically must have no disposable income. Debt usually >50% of your annual income. Income below median level for your state.
Credit Impact Low Significant - not as bad as bankruptcy Severe impact lasting 7 years Severe impact lasting 10 years
Other Considerations Creditor approved plan. Missing a payment could lose program benefits. Takes at least 3 months until first account is resolved. Need to be current with tax filing and submit proof. Must undergo credit counseling 180 days before filing. Irrevocable. Need to be current with tax filing and submit proof. Must undergo credit counseling 180 days before filing. Irrevocable.

  • Assumes credit card interest rates are reduced to 10% and adds a program fee of $50 per month. Payments are fixed at $780.
  • Assumes settlements of 50% and fee of 25% of enrolled debt.
  • Assumes 60% of debt is repaid and legal and filing fees of $3,000
  • Assumes no debt repayment and total cost relates to legal and filing fees.