Bankruptcy lets you resolve your debt under protection from a federal court. Chapter 7 bankruptcy erases most debts in three to six months and wipes the slate clean, and you may get to keep certain assets. It’ll stop calls from collectors and prevent lawsuits against you. Like debt settlement, your credit will suffer, but research shows credit scores rebound quickly.
While the steps above may seem lengthy and cumbersome, debt management plans exist because some consumers are simply unable to get out of debt on their own. Bruce McClary, vice president of communications for the National Foundation for Credit Counseling (NFCC), said that an array of circumstances can lead to situations where families need outside help. Job loss, chronic overspending, reduction in work hours, loss of income and unexpected major expenses are often the biggest culprits when consumers spiral into debt they cannot control.
In today’s challenging and still weak economy, banks and credit card companies are more likely than ever to forgive or cancel credit card debt free of charge. They offer customers a number of assistance programs and related counseling services. They really do this selfishly, as they would rather settle with the consumer vs. see them file bankruptcy, as in that case they receive nothing. More on credit card assistance programs.

I’m also going to start back up my college business. I ran a small business in college that brought in a couple hundred dollars a month. Although in college I did it by travelling, I could provide similar resources and work via a web site. I only work 14 days a month at my job, so I know I have time to build this and work towards it. Hopefully it can generate an additional $500 per month for me as well which will greatly help!


A debt management plan (DMP) is an agreement between a debtor and a creditor that addresses the terms of an outstanding debt.[1] This commonly refers to a personal finance process of individuals addressing high consumer debt. Debt management plans help reduce outstanding, unsecured debts over time to help the debtor regain control of finances. The process can secure a lower overall interest rate, longer repayment terms, or an overall reduction in the debt itself.[2]
NerdWallet recommends the 50/30/20 budget: Keep essential expenses, like housing, to 50% of your income. Then allocate 30% for wants, and use 20% for savings and debt pay-down. Since you’re focused on paying off your debt, you may decide to use money from your wants category to make extra debt payments. That will wipe out debt faster and help you save on interest.
Debt settlement. Debt settlement programs typically are offered by for-profit companies, and involve them negotiating with your creditors to allow you to pay a "settlement" to resolve your debt — a lump sum that is less than the full amount that you owe. To make that lump sum payment, the program asks that you set aside a specific amount of money every month in savings. Debt settlement companies usually ask that you transfer this amount every month into an escrow-like account to accumulate enough savings to pay off any settlement that is eventually reached. Further, these programs often encourage or instruct their clients to stop making any monthly payments to their creditors.
Disclaimer: NerdWallet strives to keep its information accurate and up to date. This information may be different than what you see when you visit a financial institution, service provider or specific product’s site. All financial products, shopping products and services are presented without warranty. When evaluating offers, please review the financial institution’s Terms and Conditions. Pre-qualified offers are not binding. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion® directly.
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