Many debt relief programs are legal, and some are scams, but “legit” answers only half the question. A company can follow every FTC rule and still be a poor fit for your debt, because relief changes how you pay – it does not make the debt disappear. What separates a sound option from a costly one is the price, the risk to your credit, the chance of being sued and whether the company follows the federal rule on upfront fees.
This page covers credit card debt and similar unsecured debt. It does not cover student loans.
What debt relief programs are, and what they are not
Debt relief is a broad term for programs that try to change what you owe to unsecured creditors or collectors: the payment, the rate, the repayment period or the total. Each change depends on a creditor, a collector or a court agreeing, so a program may get it for you but cannot promise it.
Legit means a company follows the rules. Worth it depends on your debt, your income and what you can pay.
According to the FTC, only scammers guarantee results from a “government” debt relief program that will pay off your debt.
Ads mix up the terms. Debt forgiveness usually means a creditor accepts less than the full balance, which is what settlement aims for. Credit repair deals with your credit report, not the debt, and is not covered here.
Types of debt relief programs
Four options come up most often for credit card and similar unsecured debt: a debt management plan, debt settlement, debt consolidation and bankruptcy.
| Option | How it works | Who you deal with | Main trade-off |
|---|---|---|---|
| Debt management plan (DMP) | You make one payment to a credit counseling organization, which pays your creditors | A credit counseling organization and your creditors | The plan can last 48 months or longer, and you may be asked not to take on new credit |
| Debt settlement | You or a company negotiate to pay a creditor less than the full amount | You or a settlement company, and the creditor or collector | Late fees and penalties can grow, a creditor can sue, and your credit may suffer |
| Debt consolidation | Several debts are combined into one payment | The lender or other provider that combines the debts | A lower monthly payment can mean a longer term and a higher overall cost |
| Bankruptcy | A court process under Chapter 7 or Chapter 13 that can clear some unsecured debts | A federal bankruptcy court; many people also consult a bankruptcy attorney | Information about the bankruptcy can stay on your credit report for 10 years |
Debt management plan (DMP) through credit counseling
In a DMP you make one payment to a credit counseling organization, and the organization pays your creditors. Creditors may lower your interest rates or waive some fees, but they are not required to. A plan can run 48 months or longer, and you may be required to stop taking on new credit while you are in it. The CFPB describes the same structure.
Debt settlement
Debt settlement means negotiating with a creditor or collector to pay less than the full amount owed. You can try it yourself, or a settlement company can negotiate for you. The creditor decides whether to agree, so the result is not guaranteed, and the CFPB lists several ways settlement can go wrong.
Debt consolidation
Consolidation combines several debts into one payment. A smaller monthly payment can mean a longer repayment period and more paid overall, including fees. If the new debt is secured by your home, for example through home equity, you can lose the home if you fall behind. Details are in the CFPB guide to consolidating credit card debt.
Bankruptcy
For individuals the main forms are Chapter 7 (liquidation) and Chapter 13 (individual debt adjustment), and bankruptcy can clear unsecured debts such as credit cards and medical bills. Before filing, you have to complete credit counseling with an approved organization within six months before the filing date, and after filing you complete a debtor education course to receive a discharge. Information about a bankruptcy can stay on your credit report for 10 years, according to the FTC. The U.S. Courts bankruptcy basics page explains the chapters. The CFPB notes that many bankruptcy attorneys offer a free first consultation.
What each option costs and what it risks
Fees
Settlement fees can be expensive, and some programs also charge for a third-party account where your money is held while the company negotiates, according to the CFPB. Credit counseling organizations are mostly non-profit, but they may charge for some services, such as a setup fee or a monthly fee. The FTC adds that a good counseling organization gives you information up front at no cost and does not charge for help it has not yet provided.
Credit report, penalties and lawsuits during settlement
Settlement can hurt your credit scores and make future loans harder to get. Settlement companies often advise clients to stop paying their creditors while money builds up for a deal. While payments stop, late fees and penalty interest keep growing, and a creditor can file a lawsuit. Penalties that pile up on debts that have not been settled can eat into whatever the settlement saves. Many people cannot keep up the payments long enough to settle all of their debts, or even some of them, according to the FTC.
Federal rules require a company that builds its program on non-payment to say so before you enroll: that it is likely to hurt your creditworthiness, that you may be sent to collections or sued, and that the debt can grow because of fees and interest.
Taxes
Forgiven debt may be counted as taxable income – check IRS guidance or a tax professional.
The FTC rule: no fees before results
A federal rule limits when debt relief companies can charge you. It covers less than many people assume.
What the Telemarketing Sales Rule says
Under the FTC’s Telemarketing Sales Rule, a for-profit company that sells debt relief over the phone – including when you call a number from an ad – can’t charge you a fee until it has settled or changed at least one of your debts and you’ve made at least one payment under that deal (16 CFR 310.4(a)(5)). Three conditions have to be met together:
- The terms of at least one debt have been changed or settled under a written agreement you signed, such as a settlement or a debt management plan.
- You have made at least one payment under that agreement to the creditor or collector.
- If your debts are settled one by one, the fee for each debt is either proportional to that debt’s share of your total debt, or a percentage of the amount saved. The percentage must be the same for every debt.
A company that asks for a fee before the first two conditions are met is breaking them, if the rule applies to the sale.
“Only scammers will try to collect fees from you before they settle any of your debts or enter you into a debt management plan.” – FTC
What the rule does not cover
The Telemarketing Sales Rule is a rule about sales by phone. For debt relief it also covers calls you make in response to an ad on TV, radio or online, or to direct mail, according to the FTC business guide. A sale made entirely online with no phone call, and a bona fide non-profit organization, fall outside it, so the advance-fee ban in the rule does not automatically protect you there. A company that falsely calls itself a non-profit is still covered, and misleading you about its non-profit status, or about how much you will save, how long it will take or how it affects your credit, is prohibited. State laws may give you more protection.
Dedicated accounts and required disclosures
A company may ask you to set money aside in a dedicated account only if all of these are true:
- The account is held at an insured financial institution.
- The money and any interest belong to you.
- The account administrator is not connected to the company and does not pay or receive anything for referrals.
- You can leave the program at any time without penalty.
- If you leave, you get the money back within 7 business days, except for fees the company has already lawfully earned.
Before you enroll, the company must also tell you how long it will take to get results, when it will make a genuine settlement offer to each creditor, how much money or what percentage of the debt you have to save before an offer is made, and your rights regarding the account (16 CFR 310.3(a)(1)(viii)).
Red flags of a debt relief scam
A pitch that breaks the rules above is the clearest signal to walk away. The FTC, in its debt guide and March 2026 alert, and the CFPB point to the same patterns:
- A fee before any of your debts is settled or put into a debt management plan.
- A guarantee to settle all of your debts, or a promise of quick forgiveness.
- A promise to cut your debt by a set percentage.
- A guaranteed result from a “government program” for your debt.
- Enrollment without a look at your debts, income and expenses.
- Advice to stop talking to your creditors, with no explanation of what that can lead to.
- Unexpected calls or texts that promise a fast settlement and ask for personal or financial information.
How to check a company or credit counselor before you pay
Check any debt relief company
Before you sign or share account numbers, look the company up with your state attorney general and local consumer protection agency, and search its name together with words like “complaint” and “review,” as the FTC suggests. Some states require debt relief or credit counseling companies to be licensed or registered – check with your state regulator or attorney general. If something goes wrong, you can file a complaint with the CFPB, report it to the FTC at ReportFraud.ftc.gov and contact your state attorney general.
Check a non-profit credit counselor for a debt management plan
- Get the setup fee, the monthly fee and any other charge in writing before you pay or send documents.
- Do not take “non-profit” as proof. Most counselors are non-profit, but they can charge fees, and some organizations offering DMPs have misled people. Falsely claiming non-profit status breaks the FTC rule.
- Be wary of a counselor who presents a DMP as your only option before reviewing your situation.
- Before your first payment, contact each creditor and confirm it has accepted the plan, as the CFPB advises.
- For a low-cost first conversation, the FTC points to credit unions, universities, colleges and military programs.
Where the U.S. Trustee list fits
The U.S. Trustee Program publishes a list of credit counseling agencies approved for the counseling that is required before filing for bankruptcy. The program has not reviewed or approved the agencies’ other services for people not considering bankruptcy, does not recommend any specific agency and does not guarantee quality. The list does not apply in Alabama and North Carolina, which use Bankruptcy Administrators instead. According to the U.S. Trustee Program FAQ, a fee of $50 or less for the counseling session is presumed reasonable, and if your income is below 150% of the poverty line you are presumed to qualify for a reduced or waived fee.
What you can do yourself for free
You can contact a creditor or collector directly, explain a hardship such as a job loss or medical bills, and ask whether it can lower your payment, change your payment plan or settle for less. Doing this yourself costs nothing. If you reach an agreement, get it in writing before you pay, as the CFPB recommends.
If the debt grew out of short-term loans that kept rolling over, see how to avoid a debt trap.
Debt relief FAQ
Many programs are legal: debt management plans, settlement, consolidation and bankruptcy. Scams exist too, and a fee before any debt is settled or a guaranteed result is a warning sign. Check the cost and the effect on your credit before you sign.
It depends on the option. Debt settlement may hurt your credit scores and make future loans harder to get, and late fees and penalties that build up while you stop paying can do further damage. FTC and CFPB guidance does not say how a debt management plan affects your score, so ask a counselor to explain it before you sign. Information about a bankruptcy can stay on your credit report for 10 years.
Yes. Contact the creditor or collector, explain your hardship and ask for a lower payment, a new payment plan or a settlement. It costs nothing. Get any agreement in writing before you pay.
Under the FTC’s Telemarketing Sales Rule, a for-profit company that sells debt relief over the phone can’t charge a fee until it has settled or changed at least one of your debts under a signed agreement and you’ve made at least one payment under it. Online-only sales and bona fide non-profits fall outside the rule, and state laws may add protection.
The FTC points to credit unions, universities, colleges and military programs as low-cost places to start. Get every fee in writing, check the organization with your state attorney general and confirm with creditors that they accept a plan before your first payment. The U.S. Trustee list is for pre-bankruptcy counseling, not debt management plans.
No. In a debt management plan you repay your debts through one monthly payment to a credit counseling organization, and creditors may lower rates or waive fees. In debt settlement you or a company try to get a creditor to accept less than the full amount, with a risk of growing fees, penalties and lawsuits.
Be careful with any pitch that says so. The FTC says only scammers guarantee results from a “government” debt relief program that will pay off your debt, and the CFPB also lists a new government program as a warning sign.
Not before you understand what happens next. The FTC lists advice to stop talking to your creditors, with no explanation of the consequences, as a warning sign. If payments stop, late fees and penalty interest can grow, your credit can suffer and a creditor can sue.
Sources
FTC: How To Get Out of Debt, consumer alert on debt relief scams (March 2026), Debt Relief Services and the Telemarketing Sales Rule: A Guide for Business. Telemarketing Sales Rule, 16 CFR 310.3 and 310.4. CFPB: debt settlement, debt management plans, consolidating credit card debt, negotiating with a debt collector. U.S. Trustee Program: approved agencies and credit counseling FAQ. U.S. Courts: Bankruptcy Basics. Each source is linked where it is used above.
This article is general information, not legal, tax or financial advice. State laws may give you more protection. MaybeLoan is a loan comparison service, not a debt relief company, lender or credit counselor.
