What is debt relief?

Debt relief can provide crucial assistance when your financial circumstances make traditional repayment impossible. Dragon Claws/Getty Images

Debt feels like a constant weight for many Americans in today's tough economic environment. Credit card balances, personal loans and medical bills can pile up faster than people realize, leaving households stretched thin. For example, in the second quarter of 2025, the total amount of credit card debt nationwide topped $1.2 trillion. As a result, it can be hard to see real progress, even when you're keeping up with the payments, and the stress of juggling multiple bills can quickly become overwhelming.

The current high-rate landscape doesn't make things any easier, either. With average credit card APRs hovering close to a record high, a balance that seems manageable on paper can grow quickly, adding additional financial pressure month after month. Plus, things like late fees, collection notices and the mental toll of ongoing financial strain make it clear that simply paying off debt the traditional way isn't always straightforward, or even realistic, for everyone.

As a result, more people are exploring alternatives to manage their debt obligations. But with so much contradictory information out there, it can be hard to understand what debt relief really is, much less know where to start. So, what exactly is debt relief — and how can you determine whether it's the right option for you? That's what we'll explore here.

Find out more about the debt relief options available to you now.

What is debt relief?

Debt relief encompasses a range of strategies designed to help people reduce, reorganize or eliminate their outstanding debts when traditional payment methods are no longer feasible. Think of it as a financial reset with a set of tools that can provide breathing room when you need to reduce the cost of your debt or are unable to stay on top of what you owe.

You can pursue debt relief on your own or with the help of a debt relief service. Either way, though, there are typically several approaches you can use to try and get relief, and each one carries different costs, timeframes and consequences for your credit score and financial future. 

One option you have is debt consolidation, which involves combining multiple debts into a single loan with potentially better terms. This simplifies your payments and often reduces your interest rates, resulting in lower monthly payment obligations. 

Credit counseling is another option. With this strategy, you work with a credit counselor to create a personalized debt management plan, one that could involve negotiating with your creditors to lower your interest rates and fees. As part of this plan, you'll get a modified payment schedule that helps you stay on track to pay the full amount owed over an extended period. The same credit counseling services can also provide budgeting guidance and serve as a starting point for people unsure about their best path forward.

There are more aggressive options as well, including debt settlement, which is an approach where you or the debt relief company you work with will try to negotiate with your creditors on a settlement that's less than the full amount owed, which is done in exchange for a lump sum or series of payments. This approach can significantly reduce what you owe, but it could come with credit and tax implications. 

Bankruptcy represents the most drastic form of debt relief, legally eliminating or restructuring your debts under court supervision. Chapter 7 bankruptcy can wipe out most unsecured debts entirely, while Chapter 13 creates a court-supervised repayment plan. While bankruptcy provides powerful protection from creditors, though, it severely impacts your credit score and temporarily affects your ability to borrow.

Learn how you can settle your high-rate debt for less than what you owe.

When is debt relief a good idea?

Debt relief isn't the right move for everyone. Borrowers with manageable balances, steady income and the ability to pay at least the minimum amounts on time may have success with traditional budgeting and repayment strategies. However, debt relief can be beneficial when:

• High-rate debts are growing faster than payments: If interest charges are overwhelming your ability to reduce your principal balances, debt relief strategies like consolidation or settlement could help.
• Multiple debts are causing stress and missed payments: If you're struggling to track several creditors, incurring late fees or facing collection calls, these may be signs that it's time to explore professional help.
• Income disruptions make repayment difficult: Job loss, reduced hours or unexpected expenses may require a temporary or long-term debt solution.
• You want to avoid bankruptcy but need structured help: For some, options like debt management or debt settlement provide an alternative that can minimize long-term financial damage.

Ultimately, the key to determining whether debt relief is the right move for you is assessing your overall financial picture. Debt relief is most effective when tailored to your income, expenses and goals, and when you fully understand the potential impact on your credit, taxes and financial future.

The bottom line

Debt relief can provide crucial assistance when financial circumstances make traditional debt repayment impossible, but it's not a decision to take lightly. Each approach carries significant trade-offs between immediate relief and long-term financial consequences. So, before choosing any debt relief strategy, thoroughly research providers, understand all fees and consequences and consider consulting with an expert who can help you evaluate whether debt relief is truly necessary or if other options might better serve your situation. Remember, the goal isn't just to escape current debt problems. It's also to build sustainable financial habits that prevent future crises and set you up for long-term financial health.