Debt Settlement	Debt Settlement Fee	Debt Management Plans	DMP Enrollment Fee	DMP Monthly Fee
National Debt Relief Best Overall for Debt Settlement/Low Fees/Credit Card Debt	Yes	15%–25% of settled debt	No	N/A	N/A
Apprisen Best Overall for Credit Counseling	No	N/A	Yes	$0–$45	$0–$45
Money Management International Best for Small Debts	Yes	Not disclosed	Yes	$0–$75	$0–$59
CuraDebt Best for Tax Debt Relief	Yes	15% to 25% of initial debt	No	N/A	N/A
Pacific Debt Relief Great for Low Fees	Yes	15% to 25% of settled debt	No	N/A	N/A
New Era Debt Solutions Best for Customer Satisfaction and Reputation	Yes	15% to 23% of initial debt	No	N/A	N/A
Freedom Debt Relief Great for Customer Satisfaction and Reputation	Yes	15% to 25% of initial debt	No	N/A	N/A
Accredited Debt Relief Best for Customer Service	Yes	25% of settled debt	No	N/A	N/A

What Is Debt Relief?

Debt relief is a process by which a third-party company negotiates with your creditors to lower the total amount owed for those who have accumulated so much debt that they can no longer stay on top of their payments. In exchange for this service, debt relief companies typically charge consumers a fee based on a percentage of the amount settled.

How Debt Settlement Works

Debt relief companies usually work to resolve debts through a process called debt settlement, which involves negotiating with creditors to reduce the amount of debt owed, often by 40% to 60% of the outstanding balance. 

In the debt settlement process, clients are asked to set aside a specific amount of money each month in a dedicated savings account. The goal is to save up enough money to negotiate a lump sum settlement with creditors. To build up savings and gain negotiating power, clients are also advised to pause regular payments and instead direct funds to the savings account.

While the potential savings are attractive, debt settlement comes with risks. Your credit score may be damaged once you stop paying your bills, as late payment behavior and delinquency will show up on your credit report. On top of that, creditors aren’t required to agree to a settlement, so there’s no guarantee the negotiations will be successful.

Pros & Cons of Debt Settlement

Alternatives to Debt Relief Programs

As you seek debt relief options, also consider other programs and strategies that may be better suited for your goals:

• Nonprofit credit counseling services: Credit counselors can review your financial situation, help you create a budget, and design a personalized money management plan for paying off your debt. Fees for many of these services are modest, or even free. The National Foundation for Credit Counseling (NFCC) is a great place to start to learn about options for those who are struggling with consumer debt.
• Debt management plan: Credit counselors work with your creditors to create a payment plan and schedule with a lower monthly payment using a debt management plan. If approved, you’ll make one monthly payment to the credit counseling agency until your debt is paid off. You’ll have to stop using any credit cards, but your accounts remain in good standing. These plans usually come with a fee.
• Debt consolidation: Debt consolidation involves combining multiple debts into one using a personal loan or credit card balance transfer. This can simplify the repayment process for unsecured debts like credit card bills or medical bills and save money in the long run if your consolidation loan or balance transfer credit card has a lower interest rate than your other debts. Debt consolidation also has the advantage of not affecting your credit score if you make timely payments on your new debt obligation with reduced interest rates to the credit card company or debt consolidation lender.

Debt Relief vs. Bankruptcy

Debt relief is a very different process than Chapter 7 bankruptcy or Chapter 13 bankruptcy. Declaring bankruptcy involves a debtor who is unable to repay their debts petitioning the court to seek temporary protection from creditors for their unsecured debts and is intended to result in an equitable settlement of the debtor’s obligations, typically for significantly less than was originally owed. Secured debts, like mortgage or car loans, are not discharged through bankruptcy but rather involve the borrower forfeiting the loan collateral if they are unable to make payments. Debt relief is a process by which the terms of existing debts are renegotiated by a third party for a fee to lower the cost, either in reduced interest or cancellation of part of the principal, of carrying debt.

While debt relief can negatively impact credit, bankruptcy significantly impairs both credit scores and can block access to further credit for quite a period of time as it is reported for seven years to the credit bureaus.

Debt Settlement vs. Debt Consolidation

Debt settlement is often confused with debt consolidation but the two terms are very different. Debt settlement entails negotiation between the borrower, either directly or through an agent acting on the borrower’s behalf, and the lender(s) to get the lender to accept something less than the total amount owed by the borrower. Debt consolidation is a loan made by a new lender to pay off existing consumer debts, thereby consolidating the previous debts into a single, lower-interest loan that must be repaid by the borrower.

Who Should Consider Debt Relief?

Debt relief should be considered if you:

• Have more debt payments than you can service (i.e. at least make minimum payments)
• Are willing to have your credit score significantly decreased by the debt settlement process
• Do not wish to consider declaring bankruptcy

Debt settlement services can be relatively expensive and negatively affect your credit, so it is not advisable to pursue them without first contacting your creditors to see if there are other options for debt restructuring or more favorable repayment plan terms to pay your creditors available.

Is Debt Relief Right For You?

The decision to pursue debt relief is a very personal one and should not be considered lightly. That’s because it can have long-term effects on your credit score and may not completely free you from the obligation of eventually repaying all the principal, interest, and fees that you owe on your debts.

While debt relief can provide an initial settlement with creditors, those lenders often charge off the portion of the debt not collected to debt collection agencies. However, debt settlement can offer many people a path to getting out of debt that they might not have without the help of a debt relief company’s ability to negotiate with creditors on their behalf.

How to Choose a Debt Relief Company

Before you hire a debt relief company, make sure you understand the fees and interest that would be charged, the services offered, and the firm’s reputation.

• Debt settlement generally costs 15% to 25% of the amount of the debt owed.
• Look for reputable and trustworthy companies that are accredited by the American Fair Credit Council (AFCC) or the International Association of Professional Debt Arbitrators (IAPDA).
• It can also be a good idea to contact your state attorney general’s office to see if there are any recent or outstanding complaints about any companies you are considering.

Any company you consider should be transparent about its pricing and its process, have strong customer satisfaction scores, and be free of regulatory actions.

How to Apply for Debt Relief

To apply for a debt settlement program you need to:

1. Research companies that can settle your type of debt.

• Not all debt relief companies can settle certain types of debt like debt from payday loans, student loans, or medical debt. However, most can work with common types of consumer debt like high-interest credit card debt.
• Compare fees charged between companies—most charge a flat percentage of the outstanding debt being settled.

2. Make sure you meet any debt-level requirements.

• Some companies require that you have a certain level of debt before they will work with you.

3. Contact the company that best suits your needs.

• Provide creditor information, including lender names, account numbers, loan payment amounts, total loan amounts owed, and interest rates charged
• Provide personal information like proof of employment (pay stub, 1099, or W2), Social Security number, and annual income
• Sign a contract authorizing the company to negotiate with your creditors and agree on the fee charged for the services provided by the company.

It is best to thoroughly research your options, both online and by speaking to friends and family, before deciding on a debt settlement company to ensure the one you choose has a solid reputation, isn’t under sanction by any regulatory authorities, and has good customer experience reviews. Reputability, trustworthiness, and transparency are critical factors that should be considered before selecting a company to help settle your debt.

Risks of Dealing With a Debt Relief Company

Choosing to work with a debt relief company to settle your debt does come with risks. If you decide to proceed with debt relief, be aware that you could face the following:

• Lenders who choose not to settle your debts
• A significant drop in your credit score
• Adverse information on your credit report for up to seven years
• Unpaid debt, though settled with the original lender, may be subject to sale to debt collectors
• High fees—some debt relief companies charge up to 25% of the total balances settled; this can vary by state.
• Tax liability—any debts over $600 that are settled or forgiven can be subject to federal income tax

How to Spot a Debt Relief Scam

Below are some red flags to be aware of to avoid getting scammed by a disreputable debt relief company:

• Demand for payment upfront, before it settles your debt
• A guarantee that they can settle all of your debt and make you debt-free
• An unusually high number of consumer complaints
• No TrustPilot rating or a very poor rating
• A record of sanctions and penalties levied by government regulatory agencies
• An insecure website application page without HTTPS security protocol

Why You Should Trust Us

Investopedia launched in 1999 and has been helping readers find the best debt relief companies since June 2020. We collected over 2,000 data points on the debt relief companies we reviewed and based our assessments on numerous factors, including services, costs and fees, availability, reputation and stability, customer experience.

How We Chose the Best Debt Relief Companies

To determine the best debt relief companies, we reviewed various databases, competitive analyses, consumer behavior, and more, ultimately narrowing down the list to 40 companies that offered debt settlement and/or credit counseling services. We developed a quantitative model in which we identified 53 important criteria across five categories.

We weighted each category as follows to rate debt settlement services for this article:

• Costs and fees: 41.00%
• Availability: 22.50%
• Reputation and stability: 19.00%
• Customer experience: 9.50%
• Services: 8.00%

We weighted each category as follows to rate credit counseling services for this article:

• Costs and fees: 37.00%
• Availability: 19.50%
• Reputation and stability: 18.50%
• Customer experience: 9.00%
• Services: 16.00%

We then gathered data for the 53 criteria directly from companies via websites, media contacts, and existing partnerships. Data was collected between Oct. 19, 2023, and Dec. 18, 2023. This resulted in over 2,000 data points in our rubric, which we used to score and determine the best debt relief companies (including debt settlement and credit counseling services) for people looking to manage and get out of debt.

To learn more about our process for finding the best debt relief companies, read our full methodology.

Learn More About Debt Relief