Debt Relief Solutions

Bills.com Team
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Solutions on How to Find Effective Debt Relief Partners

Your Debt Resolution Options Explained: Debt Consolidation, Consumer Credit Card Counseling, and More

Looking for debt relief? There are six main forms of debt relief, and choosing the right debt relief solution can be one of the most important financial decisions of your life.

We are here to help you make the right decision that is best for your particular needs. Each of the six choices offers positives and negatives, and no one choice is right for everyone in every situation. Debt relief is a broad term that defines many different types of debt relief solutions, including struggling to pay your loans, credit counseling, debt settlement or debt resolution programs, mortgage refinance loans, and two types of bankruptcy.

Debt Relief

Debt relief can be a hard pill to swallow.

First, let us take a brief look at each choice. Later, we make a side-by-side comparison of each option, including the short- and long-term cost of each. Finally, we show you where to learn more about each option, and next steps you can take.


1. Minimum Payments

Making the minimum monthly payments on your credit cards can be a dangerous financial strategy. Although it may feel good to push a growing problem off to another month, if you have high interest rates and a credit card debt balance that has grown to become a problem it just might be time for a gut check and to look in the mirror.

We recommend consumers pay off their debts in full each and every month, especially credit card and high interest revolving debt. If you cannot manage to do that, make sure that you are aware of the true lifetime cost of that debt and what all of your debt payoff options are, and do not just blindly keep on the treadmill of making minimum payments.

2. Credit Counseling

Credit counseling is a program that enrolls you on a debt management plan (DMP), which usually allows you to qualify for concession rates from your creditors. The primary benefits of a credit counseling program are lower interest rates and lower payments.

Credit counseling, or signing up for a debt management plan, is a very common form of debt consolidation which is essentially a way to make one payment directly to the credit counseling agency that then distributes that payment to your creditors. Most times, a credit counseling agency will be able to lower your monthly payments by getting interest rate concessions from your lenders or creditors. Credit counseling is like aspirin for a mildly sick patient, where a little help and medicine solves a real pain or financial problem.

It is important to understand that in a credit counseling program, you are still repaying 100% of your debts — but with lower monthly payments. On average, most credit counseling programs take around five years. While most credit counseling programs do not impact your FICO score, being enrolled in a credit counseling debt management plan does show up on your credit report, and, unfortunately, many lenders look at enrollment in credit counseling akin to filing for Chapter 13 bankruptcy — or using a third-party to re-organize your debts. You can learn more about this debt relief solution at the Bills.com section devoted to credit counseling.

3. Debt Settlement

Debt settlement services offer to negotiate and settle your debts for less than you owe, many times reducing debts by as much as half, before provider fees. Debt settlement is an option for people who cannot afford their monthly payments, and who are not worried if their credit rating will be negatively impacted during the program. It is important to be aware that you are not making monthly payments and staying current on your debts while enrolled in a debt settlement program, so be aware of the credit impact and the potential collection harassment from your creditors. Debt settlement is also a very aggressive form of debt consolidation, and it is akin to chemotherapy for a seriously ill patient — it will hurt but will hopefully kill the cancer and get you financially stable and healthy again quickly.

Unlike other forms of debt consolidation, debt settlement is based on the future resolution of your accounts, which means that results vary significantly and it is very important to work with a qualified and accredited provider.

4. Mortgage Refinance

You may be able to consolidate your debts with a home equity loan, mortgage refinance or other debt consolidation loans. If you are confident that you will to make the payments without building more credit card debt, debt consolidation refinance loans can be an excellent path to reducing your payments, lowering the total cost of your debts, and a refinance mortgage loan can also possibly reduce your taxes. You must be a homeowner to qualify for a mortgage refinance loan, and usually have excellent credit and significant equity accumulated in your home. You can learn more at the Bills.com refinance portal or even apply with Bills.com’s approved lenders.

5. and 6. Chapter 7 and Chapter 13

Bankruptcy should be your last choice in a debt relief solution because it will damage your credit for 7 to 10 years and, depending on which type of bankruptcy you file, you could be forced to give up some of your assets or assigned a long-term payment plan. There have also been legal changes put in place by Congress that make it more challenging to qualify for a chapter 7 bankruptcy, forcing many people to file for a Chapter 13 bankruptcy which is really a repayment plan.

Finding Professional Debt Relief Help

Bills.com makes it easy for you to apply for debt relief with pre-screened debt relief providers. For an analysis of your debts and recomendation of your best course of action, see Bills.com Debt Coach online analysis tool.

Readers often ask which debt relief solutions they should stay away from. See the Bills.com resource Debt Relief Scams to learn what to avoid, and Debt Relief Programs to learn more about the solutions discussed here.

Here are two simple tables to evaluate your six debt relief solutions:

Estimated Total Cost to Resolve $20k in Credit Card Debt
Option Total Cost Monthly Payment
(% of debt)
Monthly Payment Annual Fees
Mortgage Refinance $40,000 0.5-1.0% $100-$200 4.0-7.0%
Credit Card Pymts. $63,000 3.0-4.0% $600-$800 19.9-29.9%
Credit Counseling $30,000 2.0-3.0% $400-$600 12.0-14.0%
Debt Settlement $13,000 1.5-2.0% $300-$400 5.0-7.0%
Ch. 13 Bankruptcy $14,000 N/A Varies $2,000
Ch. 7 Bankruptcy $1,500 N/A N/A $1,500

Option Typical Length Completion Rate
Mortgage Refinance 30 yrs N/A
Credit Card Pymts. 10-30 yrs N/A
Credit Counseling 5 yrs 21-26%
Debt Settlement 3-4 yrs 40-45%
Ch. 13 Bankruptcy 5 yrs 30-35%
Ch. 7 Bankruptcy 6 mos N/A
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