Debt, Collections & Bankruptcy · Debt relief
Other ways people handle debt
In this guide
- Creditors often agree to payment plans or settlements, usually in writing.
- Nonprofit credit counseling agencies offer budgeting help and debt management plans.
- Forgiven debt can count as taxable income unless an exception applies.
Working directly with creditors
Many creditors offer hardship programs, reduced payments, or lump-sum settlements. People commonly get any agreement in writing before paying and keep records of payments.
Credit counseling and debt management plans
Nonprofit credit counseling agencies review budgets and may offer a debt management plan, where the agency distributes one monthly payment to creditors, often with reduced interest. The U.S. Trustee Program keeps a list of agencies approved for bankruptcy counseling.
Debt settlement companies
For-profit debt settlement companies negotiate with creditors for a fee. Federal rules generally prohibit them from charging fees before they actually settle a debt. The Federal Trade Commission and DFPI publish warnings about debt relief scams.
Taxes on forgiven debt
When a creditor forgives $600 or more, it may issue IRS Form 1099-C, and the forgiven amount may be taxable income. Exceptions include bankruptcy and insolvency, which are claimed using IRS Form 982.
Student loans
Federal student loans have their own repayment, deferment, and forgiveness programs, explained at StudentAid.gov.
Official sources for this guide
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