Debt relief options, compared

Keep paying the minimums

This is the default. You keep every account current and pay at least the minimum each month. Your credit stays intact as long as you pay on time.

The trade-off is time and interest. Your card statement has a minimum payment warning that shows how long payoff would take, and roughly what it would cost, if you paid only the minimum. It's worth a look.

• May suit you if: your balances are manageable and you can pay a bit more than the minimum when you're able.
• Cost: interest on the balance for as long as it lasts.
• Credit impact: none, as long as you pay on time.

Balance transfer credit card

A balance transfer moves what you owe from one card to another, often at a low promotional rate. By law, an introductory rate has to last at least six months, unless you're more than 60 days late on a payment.

There's usually a transfer fee, either a percentage of the amount you move or a flat amount, whichever is more. When the promo ends, the regular rate applies to whatever is left.

• May suit you if: you have good credit and can pay the balance down before the promo rate ends.
• Cost: the transfer fee, plus the regular rate on anything left after the promo.
• Credit impact: applying for a new card usually means a hard inquiry.

Debt consolidation loan

A consolidation loan is money you borrow to pay off several debts, so you're left with one monthly payment. It helps most when the new loan's APR is lower than what you pay now.

Some consolidation loans, like a second mortgage or home equity line, use your home as collateral. If you miss payments, you could lose your home. Look at the full cost, including fees, not just the monthly payment.

• May suit you if: your credit is good enough to qualify for a lower rate and you have steady income.
• Cost: interest and any fees, such as an origination fee or points.
• Credit impact: a hard inquiry when you apply. On-time payments help over time.

Nonprofit credit counseling and debt management plans

Credit counseling organizations are usually nonprofits that offer free or low-cost advice on money and debt. A counselor looks at your whole budget and talks through your options with you.

If it fits, they may offer a debt management plan. You make one monthly payment to the agency, which pays your unsecured creditors. Creditors may lower your interest rates or waive some fees. The FTC notes a plan can take 48 months or more, and you may have to agree not to open or use new credit until it's done.

• May suit you if: you can afford your debts at a lower interest rate and want structure.
• Cost: often low. Ask for any setup or monthly fees in writing.
• Credit impact: you keep paying in full, but you may need to close or stop using cards.

Debt settlement (debt resolution) programs

A for-profit company tries to get your creditors to accept less than you owe. You save money in a dedicated account each month, and once there's enough, the company negotiates a lump-sum settlement.

These programs often ask you to stop paying creditors while you save. Late fees and interest can grow, your credit is likely to be damaged, and you could be sued. Creditors don't have to agree to settle. Under FTC rules, the company can't charge its fees until it has settled a debt and you've made a payment on it. Settled debt may also be taxable.

• May suit you if: you have a lot of unsecured debt, steady income to save, and can accept a hit to your credit for a while.
• Cost: program fees, which can't be charged until a debt is settled, plus possible taxes on the forgiven amount.
• Credit impact: likely to drop while you're enrolled.

Bankruptcy: Chapter 7 and Chapter 13

Bankruptcy is a court process that ends with a discharge, an order that you don't have to repay certain debts. Some debts, like child support, alimony, most taxes and most student loans, usually stay.

Chapter 7 is often called liquidation. A trustee may sell property that isn't protected by exemptions, and a means test applies if your income is above your state's median. Chapter 13 lets people with steady income keep property, like a house, by following a court-approved repayment plan of three to five years. Either way, you need credit counseling from an approved agency before filing, and a bankruptcy can stay on your credit report for up to 10 years.

• May suit you if: your debts are far more than you can realistically repay. A bankruptcy attorney can tell you more.
• Cost: court fees and usually attorney fees.
• Credit impact: significant and long-lasting.

You can also do some of this yourself

You can call your creditors directly and ask for a lower rate, a hardship plan or a settlement. It costs nothing. If you reach an agreement, get it in writing.