Debt is devastating. It can lead to sociological changes like delayed marriage and damaged relationships and most commonly can cause physical health problems and mental health deterioration. Managing debt, then, becomes vital to overall wellbeing, and knowing the debt solutions available can help ensure the solution does not make matters worse than the debt itself.
There are two kinds of debt: secured and unsecured. Secured debt is backed by collateral which includes mortgages and car loans. Unsecured debt takes the form of things like credit cards, personal loans, and medical bills which typically have higher interest rates since lenders are at greater risk for loss.
Debt is costly. The Federal Reserve Bank of New York reports as of June 2026 that credit card debt totals $1.26 trillion. Credit cards incur higher interest because it is a risky loan. Credit card debt is common and the average credit card debt is over $6,000. For consumers paying just the minimum credit card payment, the payment typically applies more towards the high interest rate with little going towards the principal amount, or the amount borrowed. This can make paying down the principal difficult, causing it to take longer to pay off the debt, and will cost more in interest.
Debt is growing. According to the Federal Reserve Bank of New York, non-housing debt which includes student loans, credit cards, and auto loans increased $48 billion from January through June of 2026. About 46 percent of cardholders hold a balance each month. If that is not paid off, it can lead to delinquency. Even just a 60-day credit card delinquency rate can be reported to the credit bureaus which can lower credit scores and prevent the ability to obtain loans. Additionally, credit card 90-day delinquency rates were at close to 13 percent by March of 2026, a total not seen since about 2010, meaning consumers are taking longer to pay off debt and ultimately paying more.
When debt is out of control, consumers have several options to consider each with their own benefits and risks. While this is not an exhaustive list, it does include the more recognized solutions to solving debt problems. While lawmakers may be tempted to slap on regulatory band aids, the market has already provided options for consumers, each with their own tradeoffs and benefits.
For consumers who want to tackle debt on their own, there are solutions like the “debt snowball” popularized by Dave Ramsey where the lowest debts are paid off first. Another method is the “debt avalanche” which focuses on paying off the debt with the highest interest rate first. Both approaches are beneficial to the consumer and do not cost anything to get started. Experian notes that, of these two approaches to debt, consumers will save more using the debt avalanche method because it focuses on paying off debt with the highest interest rate. On the other hand, the debt snowball allows users to see progress right away which can be motivating to continue paying off debt. However, some people may want more help in the process.
Credit counseling organizations offer assistance to consumers who may need more help preparing a plan to pay off debt. This service, oftentimes operating as non-profits, offers counseling on most kinds of debt. They may help consumers create a debt management plan which moves all debts into one monthly payment and counselors can try to help lower interest and fees by working with creditors. Cost for this service should never be upfront. It typically consists of a free consultation and, if moving forward, will charge a set up fee of up to $75 and a monthly fee up to roughly the same amount. Some states have caps on the monthly amount these organizations are allowed to charge. Credit counseling can also provide education so future debt can be avoided. While this is a positive solution, there are other considerations. As debt management plans are common in credit counseling, these plans often require consumers to close their credit cards which can bring down credit scores.
Debt consolidation lenders are another option, often offered by banks and credit unions. This is essentially taking out a debt to pay off other debts, but there are benefits. The consumer’s debt is combined into a single loan allowing easier payment management and can sometimes have a lower interest rate on the single loan. However, there are drawbacks. Sometimes these loans come with lower interest rates, but they may not be offered in conjunction with the full length of the loan term, meaning the interest rate may increase before the loan is paid off. Additionally, the monthly payments may be smaller resulting in a greater length of time it will take to pay the loan, meaning that more money is spent on interest and fees. Consolidation lenders will often make a hard credit inquiry to determine loan eligibility which can have a negative impact on credit scores.
Often considered a last resort, bankruptcy is a solution that, some experts say, should be contingent upon debt urgency such as repossession. There are several kinds of bankruptcy filings listed as ‘chapters’ that have specific eligibility requirements. Chapter 7 is the most filed type. Filing for bankruptcy stops any actions a creditor can take through a legal ‘stay,’ at least for secured debt. Bankruptcy can also discharge some unsecured debts meaning that they are wiped clean. However, there are requirements of the individual who decides to file chapter 7 which includes a number of fees. Individuals are required to receive credit counseling and provide a copy of plans discussed incurring a fee. There are also fees for filing which includes administrative fees totaling around $330 and a trustee surcharge which can cost about $15. There are also attorney fees which can start at $1,000. One caution is that a bankruptcy filing can stay on the credit report for over 10 years so consumers should proceed with caution when determining if this is the right avenue for resolving difficult debt problems.
One of the most cautioned debt solutions is debt settlement. Debt settlement, or debt relief, companies are marketed as if they can reduce or remove debt through negotiations on the consumer’s behalf. The process often involves a series of steps such as stopping payments on credit cards and setting up a special account where consumers contribute money used to pay debts which could incur fees. While it is not legal to charge up-front fees, these companies can end up charging up to 25 percent of the debt that is owed. The Consumer Financial Protection Bureau (CFPB) warns consumers to “consider all of [the] options” before turning to a debt relief company.
Debt can be overwhelming and looking for a solution can be difficult when feeling its pressure. With consumers holding an average of over $6,000 in credit card debt alone, many are looking for real solutions. These are just a few options that often arise. It is best for consumers to do their research, know the rules, and find the solution that works best for them so that the solution does not make their debt a nightmare.
Leah Locke is a Policy Analyst with the American Consumer Institute, a nonprofit education and research organization. Follow Leah on X @leahmlocke