There are many steps both big and small to getting a handle on your debt. If you’re unsure where to turn for help or who to trust, you’re not alone. We estimate that about one in three people have been contacted by a creditor or collector seeking to collect a debt within the past year.
No matter your reasons for changing your financial situation, there are resources available to help you pay off what you owe. If you want to take steps toward any of your financial goals, we’re here to help.
Consider working with a credit counselor
Credit counselors can advise you on ways to manage your money and debt and help you create and follow a budget, which can help you save or pay off a debt. Credit counselors are usually nonprofit organizations. To get started, you can try the Financial Counseling Association of America onlineor by phone at (800) 450-1794, or the National Foundation for Credit Counseling online or by phone at (800) 388-2227.
Then, check on the organization withyourstate’s attorney general or yourlocal consumer protection agency .
A counselor may:
- Offer free educational materials and workshops
- Review your budget and come up with a plan to address your money problems
- Help you decide which debts to pay first and understand what can happen if you stop making payments
- Make an up-front agreement with your creditors to stop collections and not charge you late fees while you are in a debt management program
Develop a debt management plan
A credit counselor can help you develop a debt management plan for some or all of your debts. You may make one payment to the credit counseling organization each month or pay period to use toward payments to your creditors, which may help you focus on your other financial goals.
Credit counselors usually don’t try to reduce the amount of debt you owe. But they may be able to help lower your payments by having you make payments over a longer period, or they may get your creditors to lower your interest rate.
Beware of debt settlement companies that charge up-front fees in return for promising to settle your debts
Debt settlement companies are different from nonprofit credit counseling organizations. These companies often claim they can make a deal with your creditors to reduce the amount of debt you owe. Beware of companies that charge up-front fees. Charging a fee before settling at least one of your debts is illegal for most debt settlement companies. Dealing with debt settlement companies can be risky; you may end up in more debt than when you started. That’s because many debt settlement companies:
- Tell you to stop paying your creditors
- Tell you they will negotiate with your creditors on your behalf
What they may not tell you is that not paying your debts while trying to settle them can lower your credit scores, add late fees and interest to your account, or cause creditors or debt collectors to file lawsuits against you. These can all slow your momentum toward financial growth.
You should avoid doing business with any debt settlement company that:
- Charges any fees before it settles your debts
- Tells you to stop communicating with your creditors
- Guarantees it can make your debt go away
- Tells you it can stop all debt collection calls and lawsuits
- Promises you that it can settle all of your debt for a percentage reduction
- Promotes a "new government program" to bail out personal credit card debt
- Guarantees that your unsecured debts can be paid off for pennies on the dollar
You can check on the debt settlement company with your state’s attorney general or your local consumer protection agency .
Paying off debt can be a long journey. But using this information can get you on track to achieve your financial goals.
We have additional information about working with debt collectors, including sample letters you can use for your own situation. You can also submit a complaint about a debt collection issue or call us toll-free at (855) 411-CFPB (2372), Monday through Friday, 8 a.m. to 8 p.m. ET.
Pass it on! You can download this information in English or Spanish .
FAQs
7 steps to more effectively manage and reduce your debt
- Take account of your accounts. ...
- Check your credit report. ...
- Look for opportunities to consolidate. ...
- Be honest about your spending. ...
- Determine how much you have to pay. ...
- Figure out how much extra you can budget. ...
- Determine your debt-reduction strategy.
Consistent with applicable law, we securely share complaints with other state and federal agencies to, among other things, facilitate: supervision activities, enforcement activities, and. monitor the market for consumer financial products and services.
What percentage should I offer to settle debt? ›
Some will agree to settle your debt for as little as a third of the total, while others will try to get as much as 80% of the debt paid. You may choose to start your negotiation by offering to pay a low percentage of the total debt — such as around 25% — and negotiate from there.
How do you settle a debt after being summoned? ›
Summary: Yes, you can settle after being served. The best way to settle a debt lawsuit is first to file an Answer, then to contact the other side and make an offer. You can use SoloSuit to respond to a debt lawsuit in just 15 minutes and send a settlement offer with SoloSettle.
How long will it take to pay off $30,000 in debt? ›
It will take 41 months to pay off $30,000 with payments of $1,000 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.
How to pay $30,000 debt in one year? ›
The 6-step method that helped this 34-year-old pay off $30,000 of credit card debt in 1 year
- Step 1: Survey the land. ...
- Step 2: Limit and leverage. ...
- Step 3: Automate your minimum payments. ...
- Step 4: Yes, you must pay extra and often. ...
- Step 5: Evaluate the plan often. ...
- Step 6: Ramp-up when you 're ready.
The CFPB supervises a range of companies to assess their compliance with federal consumer financial laws. We have supervisory authority over banks, thrifts, and credit unions with assets over $10 billion, as well as their affiliates.
When should I contact CFPB? ›
Having a problem with a financial product or service? We help consumers connect with financial companies to understand issues, fix errors, and get direct responses about problems. Tell us about your issue—we'll forward it to the company and work to get you a response, generally within 15 days.
Does filing a complaint with the FCC do anything? ›
We do not resolve individual complaints on these issues and you will not receive status emails about your complaint. However, the collective data we receive helps us keep a pulse on what consumers are experiencing, may lead to investigations and serves as a deterrent to the companies we regulate.
What not to say to a debt collector? ›
Don't provide personal or sensitive financial information
Never give out or confirm personal or sensitive financial information – such as your bank account, credit card, or full Social Security number – unless you know the company or person you are talking with is a real debt collector.
Offer a Lump-Sum Settlement
Some want 75%–80% of what you owe. Others will take 50%, while others might settle for one-third or less. If you can afford it, proposing a lump-sum settlement is generally the best option—and the one most collectors will readily agree to.
Is it better to settle a debt or not pay at all? ›
Is it better to settle debt or pay in full? Paying debt in full is almost always the better option when possible. Research debt payment strategies — debt consolidation could be a good option — and consider getting financial counseling.
What is the best debt settlement company? ›
Summary: Best Debt Relief Companies of May 2024
| Company | Forbes Advisor Rating | Best For |
|---|
| National Debt Relief | 4.5 | Best for Fee Transparency |
| Pacific Debt Relief | 4.1 | Best for Established Track Record |
| Accredited Debt Relief | 4.0 | Best for Quick Resolution |
| Money Management International | 4.0 | Best Nonprofit for Debt Relief Help |
3 more rowsYou have 30 days from the day you were served with the summons to respond to the debt collection lawsuit. You do this by filling out a court form (called an answer form), filing it with the court, and delivering it to the person who sued you (called the plaintiff).
How long do you have to settle a debt? ›
It is not unusual for the entire debt settlement process to take three to four years. Your attorney or debt settlement company will need time to negotiate with your creditors. The more creditors you have, the more time it will take.
How to get debt written off? ›
Which debt solutions write off debts?
- Bankruptcy: Writes off unsecured debts if you cannot repay them. Any assets like a house or car may be sold.
- Debt relief order (DRO): Writes off debts if you have a relatively low level of debt. Must also have few assets.
- Individual voluntary arrangement (IVA): A formal agreement.
Here are some debt-relief options to consider.
- Create a Budget. ...
- Do Nothing and Get Debt Relief That Way. ...
- Negotiate With Your Creditors to Get Debt Relief. ...
- Seek Debt-Relief Assistance From a Consumer Credit Counseling Agency. ...
- File for Bankruptcy to Get Debt Relief. ...
- Get Help With Your Federal Student Loans.
Look for a credit counselor who can do the most for you. You might have to pay some money for help. But a good credit counselor will not ask you to pay in advance.
How to pay off $20,000 in debt? ›
If you have $20,000 in credit card debt that you need to pay off in three years or less, you have multiple options to consider, including:
- Take advantage of a debt relief service.
- Consolidate your debt with a home equity loan.
- Take advantage of 0% balance transfer credit cards.
