Is the U.S. debt relief program legit?

Unfortunately, the federal government of the United States does not run any independent relief initiatives. However, there are a number of legitimate debt relief programs and choices available to aid people in managing and lowering their debt. These relief programs are typically offered by local agencies, nonprofit organizations, and legitimate debt relief companies. They include options like debt management plans (DMPs), debt consolidation loans, and government-sponsored assistance programs.

What is the disadvantage of a debt relief program?

Debt relief programs can offer valuable assistance to individuals struggling with overwhelming debt, but they also come with certain disadvantages and potential drawbacks. It's important to be aware of these disadvantages when considering whether a debt relief program is the right choice for your situation. Some common disadvantages of debt relief programs include negative credit score impacts, limited eligibility, additional fees and costs, tax implications, creditor relations, and other long-term consequences.

Who qualifies for debt relief?

Debt relief qualifications vary based on the program and the company offering it. For example, you’ll typically need over $10,000 in unsecured debt to qualify for debt settlement. If you want to consolidate your debts, you’ll need a high credit score to get a lower interest rate.

Does debt relief hurt your credit?

The impact of debt relief programs on your credit depends on what your current credit score and the type of program you choose. For example, credit counseling and debt management typically have minimal impact on your credit. Debt settlement can lower your credit score, but your credit is likely already damaged due to late fees and missed payments.

What is the downside of debt relief programs?

Debt relief programs may lower your credit score. You’ll also owe taxes to the IRS on any debt that a lender forgives. Lenders are also not obliged to accept your settlement offer.

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How Debt Relief Programs Can Help You Pay Your Debts in 2025

7 MIN READ

Published March 23, 2023 | Updated January 31, 2025

Expert Verified

Written by Priyanka Trivedi

Edited by Wes Silver

Reviewed by Teresa Dodson

Turbo Takeaways

Debt relief programs can be a viable option to help you take back control of your finances. These programs are not a quick-fix, one-size-fits-all option. Instead, they are long-term solutions that require dedication but can help you get out of high-interest debt over a few years.

If you are one of the millions of Americans struggling to pay your debts and make ends meet, you are not alone. The US household debt rose to over $17.94 trillion during the third quarter of 2024. That’s almost 50 thousand dollars of debt for every household, causing more people to consider debt relief to take control of their finances and work towards a debt-free life.

Debt relief can help you make your payments manageable. In this guide, we provide you with a detailed understanding of what these programs are, how they work, and if they will be the right option for you.

What Are Debt Relief Programs, and How Do They Help You?

Debt relief programs are strategies that can make it easier to manage and repay debt. They can involve negotiating with lenders, consolidating multiple debts into one, lowering your interest rate, or adjusting your repayment term.

These programs are offered by nonprofit and for-profit institutions and are aimed at helping you get out of debt by eliminating, managing, or consolidating your debt.

While debt relief services can help you avoid bankruptcy, it is important to understand that there are certain qualification and program completion requirements involved.

To find the best debt relief programs for you, it is best to assess your debt-to-income ratio and speak to a professional. A professional counselor can help you take stock of the debt you currently owe, what type of plan will fit your current needs, and how much you will be able to pay off.

Do Debt Relief Programs Work?

It’s best to seek debt relief before your debt goes out of hand. But do debt relief programs really work? Yes, but there are a number of factors that can impact the success of a debt relief program for borrowers.

For example, if you choose to work with a debt relief company, you will need to ensure that the company is reputable and has a good track record of success. Always check the reviews of the company at the Better Business Bureau and the Consumer Financial Protection Bureau before you decide to work with a company.

Personal commitment is another important part of a successful program. Most debt relief programs will take a few years to complete successfully. However, committing and sticking with the repayment program means you will be able to pay off your debt sooner for less money.

Types of Debt That Qualify for Debt Relief Programs

The type of debt you currently have will also determine if you will qualify for debt relief programs. There are two types of debt:

Unsecured Debt is debt that is not backed by collateral. Credit card debt, collections debt, personal loan debt, and medical bills are examples of unsecured debts. Generally speaking, unsecured debt works best with debt relief programs.
Secured Debt is debt that is backed by collateral, such as auto loans and mortgages. These are usually excluded from traditional debt relief programs like debt settlement and debt management negotiations. There are fewer options to get relief from these debts.

If you have student or tax debt, there are also programs for you. These government programs can help you reduce the amount of debt that you currently owe to debt collectors, such as the Offer in Compromise by the IRS and the Student Loan Relief Plan through the Department of Education.

Choosing the best option for your situation will also depend on your unique circumstances and the specific debt relief program for which you qualify.

Most Popular Debt Relief Programs

There are several different types of debt resolution programs that can help you become debt free in 3-5 years of time if you are committed. Two of the most popular options available are debt management and debt settlement.

Debt Management

A debt management plan can help you make a single, manageable payment toward all of your debts. When you enroll in a program, you may be able to receive lower interest rates and have certain fees waived.

You don’t need to take out a new loan or get a credit card with a debt management plan, so your credit scores will not impact your qualifications. It is also important to note that if you miss any of your payments, the concessions can be terminated.

Pros	Cons
No need to take out a new loan or credit card.	There will be a small maintenance or enrollment fee for enrolling in the program.
Helps you create a realistic and affordable budget so you can pay off your total debt.	You will need to make the monthly payment consistently.
It can help you save on late fees.	You will not have access to any new loans and may have to close your credit cards.
Reduce the interest rates on your existing credit card debt.

Debt Settlement

Debt settlement involves negotiating with lenders to settle your debt for less than what you currently owe. You can simply contribute to a new savings account and use it to pay a lump sum to settle your account.

If you have more than $10,000 in unsecured debt and are struggling to make payments, debt settlement can be a great way to pay off your debts and regain control of your finances.

Pros	Cons
Helps you avoid bankruptcy.	Takes 36 to 48 months to clear all your debt in some cases.
Offers one of the quickest ways to settle large amounts of debt.	Averages low completion rates (45-50% typically).
Allows you to settle your debt by up to about 50% before fees.	Creates a negative impact on your credit score.

Alternatives to Popular Debt Relief Programs

If the options discussed above are not suitable for you, there are a number of other alternative debt relief options that you can choose from.

Credit Counseling

Sometimes, all you need is guidance from a professional credit counseling agency. A credit counselor can take a more in-depth look at your finances and your budget, explain how it works, and help you come up with a debt repayment plan.

Debt Consolidation

If your credit scores are fair or good, you can qualify to get a lower interest rate debt consolidation loan to consolidate all your debts into a single monthly payment.

Many credit card companies offer 0% balance transfer credit cards that can also be used to consolidate your credit card payments and make your payment schedule more manageable.

Bankruptcy

While this is not an ideal solution, sometimes bankruptcy may be the only path available. Filing for Chapter 7 bankruptcy can help you erase most outstanding debts, such as credit cards, personal loans, and medical debt.

There are also other alternatives to Chapter 7 bankruptcy, such as Chapter 11 and Chapter 13, depending on your individual circumstances.

Debt Forgiveness

While complete debt forgiveness is very rare, it may be possible to qualify for partial loan forgiveness.

Sponsored assistance programs may sometimes be available for some individuals, and mortgage debt relief programs offered by your mortgage lender may be available. Check your eligibility for these programs.

Find the Right Debt Relief Program

Not all debt relief programs may be right for you. Your financial goals, commitment, and the resources currently available to you will impact the success of a program.

Before you sign up for any program, make sure that you are comfortable with the commitment you are making and the requirements of the program.

“Take an honest look at your financial situation to determine which one of these options is best for you,” shares Teresa Dodson, debt expert and founder of Greenbacks Consulting. “The good news is, you have options, and there are programs that can help you,” Dodson adds.

Debt relief programs can provide you with the reprieve you need from heavy debt, but it is important to work with debt settlement companies that will put your needs first. Check reviews of the debt relief company you plan to work with.