A realistic plan to get out of debt
Compare payoff methods with your real numbers, understand every option from balance transfers to bankruptcy, and learn exactly what debt collectors can and can't do.
Where to start when you're behind
When money is short, not every bill carries the same risk. Protect the essentials first, then build a plan for the rest.
If a collector or lender is pressuring you to pay an unsecured debt before rent or utilities, you can say no. Losing housing or power usually does more damage than a late card payment.
List every debt
Write down each balance, interest rate, minimum payment and due date. Pull your free credit reports to catch anything you've missed.
Cover the essentials
Housing, utilities, food, transportation to work and any secured loans you can't afford to lose come first.
Make every minimum payment you can
Minimums keep accounts current and avoid late fees and credit damage.
Choose a target for extra money
Put anything extra toward one debt at a time, using the snowball or avalanche method below.
Call creditors before you fall behind
Many offer hardship plans, lower payments or due date changes if you ask early.
Snowball vs. avalanche, with your debts
Snowball pays the smallest balance first for quick wins. Avalanche pays the highest interest rate first to save the most money.
Debt payoff calculator
Enter up to four debts. Leave a row at zero to skip it.
Estimates assume fixed rates, no new charges and that minimum payments stay the same. Real minimums often fall as balances drop.
Six ways out, compared
From doing it yourself to legal protection. The right choice depends on how much you owe, your income and your credit.
| Option | How it works | Costs | Credit impact | Best for |
|---|---|---|---|---|
| DIY payoff plan | Pay minimums on everything and extra on one target debt | None | Improves as balances fall | Anyone who can cover minimums |
| Balance transfer card | Move card debt to a card with a low intro APR | Transfer fee, often 3% to 5%Rate jumps when the promo ends | New inquiry and account; can help utilization | Good credit and a plan to repay during the promo |
| Consolidation loan | A fixed-rate loan pays off several debts | Interest, possibly an origination fee | New inquiry; on-time payments help | Fair to good credit and a lower rate than your cards |
| Debt management plan | A nonprofit credit counselor arranges one monthly payment, often with lower rates | Small setup and monthly fees, set by state | Cards are usually closed; payments reported on time | Steady income but high card interest |
| Debt settlement | A company negotiates to pay less than you owe, usually after you stop paying | Fees charged only after a debt is settledForgiven debt may be taxable | Serious damage from missed payments | Last resort before bankruptcy |
| Bankruptcy | Chapter 7 wipes out eligible debts; Chapter 13 sets a 3 to 5 year repayment plan | Court and attorney fees; required credit counseling | Stays on reports 7 to 10 years | Debt you can't realistically repay |
Debt settlement rules. Under the FTC's Telemarketing Sales Rule, debt relief companies that sell by phone can't charge fees before they settle or change at least one of your debts.
Forgiven debt can be taxed. If $600 or more is canceled, you may get a Form 1099-C, and the amount may count as income unless an exception like insolvency applies.
Your rights with debt collectors
The Fair Debt Collection Practices Act and the CFPB's Regulation F set clear limits on third-party debt collectors.
- Reasonable hours onlyCollectors generally can't contact you before 8 a.m. or after 9 p.m. your time.
- Limits on callsMore than seven calls in seven days about a debt is presumed to be harassment.
- A validation noticeYou must get the amount, the creditor's name and how to dispute, usually within five days of first contact.
- 30 days to disputeIf you dispute in writing during the validation period, the collector must pause until it verifies the debt.
- Tell them to stop contacting youOnce you ask in writing, they must stop, except to confirm or say what they'll do next.
- No threats or liesThey can't threaten arrest, use abusive language or misstate what you owe.
- Privacy at work and with othersThey generally can't discuss your debt with your employer, family or friends.
- Report violationsSubmit a complaint to the CFPB or your state attorney general.
Sample debt validation letter
Send within 30 days of the collector's first notice, by certified mail. Replace the bracketed parts.
Old debt and the statute of limitations
Each state sets a time limit for suing over a debt, often several years. After it passes, the debt is "time-barred."
- Collectors can still ask you to pay a time-barred debt, but they can't sue or threaten to sue you over it.
- In some states, making a payment or acknowledging the debt in writing can restart the clock. Get advice before paying anything on very old debt.
- The statute of limitations is separate from how long a debt stays on your credit report, which is generally seven years from when you first fell behind.
- If you're sued, respond by the deadline. Ignoring a lawsuit can lead to a default judgment and wage garnishment, even on a debt you could have challenged.
Hardship help most people don't ask for
Programs that can lower what you owe or pause payments while you get back on track.
Ask for financial assistance
Nonprofit hospitals must have written financial assistance policies. Request an itemized bill and ask whether you qualify for a discount.
Energy bill help
The federal LIHEAP program helps eligible households with heating and cooling bills. Your utility may also offer payment plans.
Talk to your servicer
Federal loans may offer income-driven plans, deferment or forbearance. Check options at StudentAid.gov.
Hardship programs
Many issuers can lower your rate or payment for a set time. Call and ask specifically for a hardship program.
Signs it's time to get help
A nonprofit credit counselor can review your budget and options for free or a low fee. Look for agencies affiliated with the National Foundation for Credit Counseling.
Find a nonprofit counselor- You're only making minimum paymentsAnd balances aren't going down.
- You're borrowing to pay other debtsIncluding new loans to cover old ones.
- More than a third of your income goes to debtNot counting your rent or mortgage.
- Collectors are callingOr you're avoiding opening your mail.
Debt questions
Can't find yours? Ask our team.
Is the snowball or avalanche method better?
Avalanche usually saves the most interest because it targets the highest rate first. Snowball can be easier to stick with because you clear small debts quickly. The best method is the one you'll follow.
Will a debt management plan hurt my credit?
Enrolling doesn't directly lower your score, but the cards in the plan are usually closed, which can raise utilization at first. On-time plan payments help over time.
Can a debt collector garnish my wages?
Generally only after suing you and winning a court judgment. Some federal debts, like defaulted federal student loans and back taxes, can be collected without a lawsuit.
Should I take a loan to pay off debt?
Only if the new loan has a lower APR than your current debts and you stop adding new balances. A high-cost loan used to pay other debts usually makes things worse.
What happens if I ignore a debt collector?
The debt doesn't go away. The collector may keep contacting you, report the debt to credit bureaus or sue. Responding in writing and requesting validation protects your rights.
Talk to someone who can help
A nonprofit credit counselor can review your debts and budget, often for free, and tell you whether a debt management plan fits.
Sources
- CFPB: Debt collection rule (Regulation F)
- CFPB: Debt collection resources and sample letters
- FTC: Debt collection FAQs
- FTC: How to get out of debt
- IRS: Canceled debt, is it taxable or not?
- U.S. Trustee Program: Credit counseling and debtor education
- LIHEAP: Low Income Home Energy Assistance Program
- National Foundation for Credit Counseling
This page is general education, not financial, legal or tax advice. Rules and rates change; check the source or a qualified professional before making decisions.
One money tip, every Tuesday
New rules, rate changes and one thing you can do this week. Takes five minutes.