Last reviewed: 3 October 2026

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Debt relief options compared: paying on your own, credit counseling, consolidation, settlement and bankruptcy

Five routes come up when people cannot keep up with their debts. You can deal with creditors yourself. You can use a nonprofit credit counselor and a debt management plan. You can take a debt consolidation loan. You can use a debt settlement company. Or you can file for bankruptcy. The CFPB, FTC and federal courts describe each differently. This page lines up what they say about cost, time, credit reports and legal protection. It does not rank the options or say which suits anyone.

The short version

• The routes have different aims. The CFPB says a debt management plan works to lower your overall monthly payment.^[1] The FTC describes a settlement as a lump sum that is less than you owe.^[3] The federal courts say a bankruptcy discharge releases you from personal liability for specific debts.^[4]
• Fees differ in kind. The sources describe fee limits for debt settlement companies, possible fees for credit counseling, interest and points on loans, and court and attorney fees for bankruptcy.
• The CFPB and FTC pages say more about the risks of for-profit services than about the other routes. The difference in length is theirs, not our ranking.
• Where a cell says the sources do not state something, that is not a statement that nothing happens.

At a glance

Paying on your own

• What it involves. The FTC says to call the creditors you owe before a debt collector gets involved. If the debt has gone to a collector, it says to try talking to the collector at least once.^[3]
• Cost. The FTC says you do not need to pay a company to talk to your credit card company for you. You can do it yourself, for free.^[3]
• Time. The sources we read for this page do not state a time frame.
• Credit report. The FTC says that if an agreement means late payments or paying less than you owe, it could negatively affect your credit report and credit score.^[3]
• Protection and limits. The FTC says that any savings or discount from the amount you originally owed could be considered income and therefore taxable.^[3]

Credit counseling and a debt management plan

• What it involves. Under a debt management plan, you make a single payment to the credit counseling organization each month or pay period. The organization then pays your creditors.^[1] The FTC says a plan covers unsecured debts such as credit card, student loan and medical debts, and not debts secured by collateral such as houses or cars.^[3]
• Cost. The CFPB says credit counseling organizations are permitted to charge fees for their services.^[1] The FTC says to ask how much they will charge.^[3]
• Time. The FTC says a successful plan requires regular, timely payments and can take 48 months or more to complete.^[3]
• Credit report. The sources we read for this page do not state an effect on your credit report. The FTC says you might have to agree not to apply for, or use, any more credit until the plan is finished.^[3]
• Protection and limits. The CFPB says counselors do not always negotiate reductions in the amounts you owe. They work to lower your overall monthly payment, and might get a creditor to lengthen the repayment time or lower the interest rate.^[1] The CFPB says a counselor sets up a payment plan, including getting creditors to agree not to pursue collection efforts or charge late fees while you are on the plan.^[1] It also says the arrangement usually does not affect your taxes.^[1]

A debt consolidation loan

• What it involves. The FTC says ways to consolidate include a second mortgage, a home equity line of credit, or a personal debt consolidation loan from a bank or finance company.^[3] The CFPB says the loan might have a lower interest rate than you are paying now.^[1]
• Cost. The FTC says most consolidation loans have costs. In addition to interest, you may pay "points," and one point equals one percent of the amount you borrow.^[3]
• Time. The CFPB says a monthly payment might be lower because you are paying over a longer time. It says that, with the loan's length, fees and costs taken into account, you might pay more overall than on your original debts.^[1]
• Credit report. The CFPB says that if problems with debt have affected your credit score, you probably will not be able to get low interest rates on a balance transfer, a debt consolidation loan or a home equity loan.^[6]
• Protection and limits. The FTC says some of these loans require you to put up your home as collateral. If you cannot make the payments, or they are late, you could lose your home.^[3] The CFPB says a low rate may be a "teaser rate" that lasts only a limited time.^[1]

Debt settlement

• What it involves. The FTC says the companies negotiate with your creditors to let you pay a "settlement," a lump sum that is less than you owe. Meanwhile you set aside a specific amount each month in a designated account.^[3]
• Cost. The CFPB says a debt settlement company could be breaking the law if it charges a fee before a successful result, an agreement with the creditor, and a payment to the creditor have all happened.^[1] The FTC says there are generally two fee types: a proportion of the debt resolved, or a percentage of the amount saved.^[3]
• Time. The FTC says the process can take years to complete.^[3]
• Credit report. The FTC says your credit report and credit score are likely to be damaged while you are in a debt settlement program.^[3] The CFPB says using these services can have a negative impact on your credit scores and your ability to get credit in the future.^[2]
• Protection and limits. The CFPB says debt settlement companies cannot guarantee how much you will save or how long it takes, and cannot erase all your debts.^[1] It says money you save up in the account still belongs to you and you can withdraw it at any time without penalty.^[1] The FTC says you could be sued while you wait for a settlement, and that savings from debt relief services could be considered taxable income.^[3] The CFPB also says debt settlement companies usually cannot get better terms than you could get by negotiating yourself.^[1]

Bankruptcy

• What it involves. Federal law provides several kinds of bankruptcy case. Chapter 7 is called liquidation. Chapter 13 is for an individual with regular income, who proposes a plan to repay creditors over time.^[4] Chapter 7 uses a "means test" to decide whether individual consumer debtors qualify.^[4]
• Cost. The FTC says filing fees are several hundred dollars and attorney fees are extra.^[3]
• Time. The federal courts say a Chapter 7 debtor normally receives a discharge a few months after the petition is filed. A Chapter 13 plan usually runs three to five years, and the discharge comes after the payments are made.^[4]
• Credit report. The FTC says bankruptcy is generally considered a last option because of its long-term negative impact on your credit, and that bankruptcy information stays on your credit report for 10 years.^[3]
• Protection and limits. The FTC says both main types may discharge unsecured debts like credit card or medical debt. It says they may also stop foreclosures, repossessions, garnishments, utility shut-offs and debt collection activities.^[3] It says bankruptcy usually will not erase child support, alimony, fines, taxes and most student loan obligations unless you can prove undue hardship.^[3] The FTC also says you must get credit counseling from a government-approved organization up to six months before filing, and take a debtor education course after filing.^[3] The U.S. Trustee Program says that if the counseling course is not completed before filing, the case could be dismissed.^[5]

How our Standard and Register relate to this page

If you are weighing a debt settlement company, our Standard lists the points we check, such as when fees are charged. The Register shows how those findings are dated and re-checked. Neither says which route to choose. For the checks you can run yourself, see how to verify a debt settlement company.

How to verify this yourself

1. Read the CFPB's comparison of credit counseling, debt settlement, consolidation and credit repair.^[1]
2. Read the FTC's "How To Get Out of Debt," which has a section on each route.^[3]
3. For bankruptcy, read the federal courts' overview and the U.S. Trustee Program's page on the required courses.^[4] The Trustee Program page links to its lists of approved agencies and providers.^[5]

What this page does not cover

It does not say which option fits your debts, what a given company charges, or whether you qualify for Chapter 7 or 13. It does not cover credit repair, which the CFPB compares separately; see credit repair vs. debt settlement vs. debt consolidation. It leaves out tax debt, student loans and debts with their own rules. Rules differ by state and by type of debt. It is general information, not legal or financial advice.

Your next step

List each debt, who says you owe it, and any court date. Then read the section above for each route you are weighing, and check any company you are considering with our company-check hub. For personal advice, see free legal help for debt problems. For a first step with a card issuer, see how to ask a card issuer for a hardship plan.

When we will update this page

We revisit it when the CFPB, FTC or federal courts revise these pages. Sources last read 3 October 2026.