Definitive Guide to a Debt Free Life – Chapter 8: Types of Debt Relief

In the previous chapter of The Definitive Guide to a Debt Free Life, we thoroughly discussed credit monitoring, both as a service you can seek out and as a process you can do yourself.

This chapter, Chapter 8, focuses on relief for those in debt. Simply put, there are so many different types of debt relief out there that choosing the best one can be quite overwhelming.

And debt is difficult enough to deal with as it is. Why make it even harder by sorting through the different debt relief options yourself and potentially choosing one that is not right for you?

That is why we have broken down and explained the top five types of debt relief below. Along with a brief description of each is a discussion of who they work best for.

types of debt relief

Read on to find out the best debt relief strategy to use in your particular situation.

Debt Management

One of the most popular and ultimately effective methods of debt relief is debt management. In fact, we discussed it briefly earlier on in this guidebook in Chapter 4: Debt Management. However, this chapter was primarily focused on DIY (do it yourself) debt management rather than the service offered by debt relief companies.

Debt management is simple to understand. A relief company seeks out and pounds down an agreement between you and your creditors. Usually, this results in lowered monthly payment amounts, taking into consideration the sum that you can safely pay each month.

Those with unsecured debt like credit card debt are perfect candidates for debt management. If you have been struggling to meet your monthly payments for months, it might be a good option for you. ( 

Debt Consolidation

Another highly popular and effective method of debt relief is debt consolidation. There are many ways to go about debt consolidation but they are all based upon the same principles.

Debt consolidation consists of taking out a single new loan to cover all of your previous loans. You then pay off this single loan with one payment each month. This improves organization and prevents late payment as you do not have as many dates to remember. Consolidated loans generally come with lower interest rates as well.

If you are struggling to meet your monthly payments on several debts, then debt consolidation could be for you. Naturally, it is not the best method of debt relief for those with a single debt. You need at least two debts for debt consolidation to be an effective relief method. ( 

Debt Settlement 

Sometimes known as debt negotiation, debt settlement is a method of debt relief that is often used by people up to their ears in debt. It is a solid relief option only for those that are seriously in debt.

In debt settlement, your debt relief company negotiates with your creditors for reduced overall payments. Through their discussions they attempt to lower the overall amount that you owe.

This benefits you in that you no longer have to pay off the full amount of your debt. It benefits your creditors because they do not lose all of the money they loaned you. Instead, they get a portion of it back. (

Credit Counseling 

Perhaps the very most popular type of debt relief is credit counseling. Unlike the other forms of debt relief already discussed in this chapter, credit counseling is a little different. It is not so much about reducing your debt load as it is learning skills to pay off your debts on time, stay out of debt in the future, and manage your money successfully and responsibly.

Credit counseling is all about learning long-term financial skills that will help you manage your money. You generally meet with a credit counselor from a credit counseling agency to go over your various debts and problem spots. In many cases, you come up with a plan of attack, set a budget, and explore other relief strategies.

Credit counseling is a great idea for almost anybody struggling with debt or money. It can be used effectively by itself or paired with the other types of debt relief discussed in this chapter. ( 


Another debt relief option that you have when your debt problem is seriously bad is bankruptcy. For many, this is the end of the line, a last ditch effort.

Bankruptcy is simply a method that you can use to eliminate your debts. In many cases, you must make small payments each month. There are two main types of bankruptcy for consumers: Chapter 7 and Chapter 13. The biggest difference is that in Chapter 7 some of your assets might be sold to cover some of the debt that you are having eliminated.

Bankruptcy is a very serious form of debt relief. It should only be used as a final option. And, even then, you should thoroughly discuss it with a financial advisor before taking action. (

As you can see, those that are struggling with debt have many options for seeking out debt relief. Of course, you want to exhaust personal options of debt relief (like creating a budget and personal loan repayment plan) before exploring these.

While all of the relief options discussed above are effective, many of them come with negatives. The primary disadvantage of the above relief options (credit counseling not included) is a negative mark on your credit report and a potential drop in your credit score. However, when you have been struggling with debt for ages, this might just be the price you need to pay for debt relief.

Now that you have a strong understanding of the main types of debt relief, it is time to talk about how you can go about finding this debt relief. And that is why Chapter 9 of The Definitive Guide to Debt Relief focuses on finding debt help. 



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