Americans are feeling a credit crunch: U.S. consumers held a record $1.21 trillion in credit card debt in the second quarter of 2025, according to the New York Fed. Nearly half of cardholders carry a balance from month to month and the portion who are behind on even the minimum payment has risen to 12.3%, up from 10.9% in 2024 and 8% in 2023.
Credit cards and Buy Now, Pay Later plans make it easy for balances to balloon. And high interest rates mean it’s hard to make a dent in the principal.
If you’re facing this challenge, a debt relief company could help. In exchange for a fee of between 15% and 25%, these businesses will negotiate with your creditors in hopes of getting them to accept less than the full amount you owe.
If they’re successful, you could owe as little as 50% of your original balance — sometimes less, if the debt is old or in collections.
Not everyone is a candidate for debt relief, however. Look at your current situation and see if you match the criteria below.
1. You have unsecured debt
Debt relief companies can only negotiate debt that is unsecured, meaning it’s not tied to a physical asset. Credit cards, personal loans, medical debts, payday loans and debts that are already in collections are all eligible unsecured debts. Private student loans and some tax debts may also qualify.
Debts tied to an asset, like a car loan or a mortgage, aren’t eligible for debt settlement programs because your creditor can reclaim the asset being used for collateral.
2. You have $7,500 in unsecured debt
Debt relief companies typically require clients to have a minimum amount of debt to enroll in their program. Some companies have a minimum of $7,500, while others set a floor of $10,000 or more.
If your credit card balances are already that high, you’re more likely to have trouble keeping up with your bills. You may also be seeing your payments go straight to interest instead of chipping away at the balance. If so, you could be a good candidate for debt relief.
If you have less than $7,500, you might want to try another way to get back in the black. You could use a debt consolidation loan to lower your interest rate or a balance transfer credit card that charges zero interest for up to 20 months.
Looking to consolidate debt or make home improvements? Consider these personal loan offers.
Offers in this section are from affiliate partners and selected based on a combination of engagement, product relevance, compensation, and consistent availability.
Annual Percentage Rate (APR)
3. You’re already a few payments behind
Many debt relief companies require clients to have already missed several payments, though they don’t disclose specifics. The belief is that a creditors who see a customer falling behind will be more willing to negotiate.
If your account is already with a collection agency, you’re also more likely to be able to negotiate what you owe. These companies buy debts for a fraction of the original amount, so they’ll settle for less to recoup their investment and avoid a drawn-out collection process.
4. You live in a state where a debt relief company operates
Because of state-level regulations, few debt relief companies operate nationwide. States like Colorado, Oregon and West Virginia have particularly stringent rules around debt relief, so residents of those states may have difficulty finding a company to enroll with.
Pacific Debt Relief, one of our top picks for debt relief companies, operates in every U.S. state except Oregon. New Era Debt Solutions is available nationwide except in Iowa, Maine and Oregon.
Pacific Debt Relief
-
Minimum debt
-
Fees
Settlement fee is between 15% and 25% of enrolled debt.
-
Availability
Available nationwide except in Oregon
-
Highlights
Pacific Debt Relief’s fee is based on the percentage of settled debt, rather than the amount you started the program with.
New Era Debt Solutions
-
Minimum debt
-
Fees
Settlement fee is 14% to 23% of enrolled debt.
-
Availability
Available nationwide except for Iowa, Maine and Oregon
-
Highlights
Clients average 28 months to complete their debt settlement program, according to New Era, faster than many competitors.
5. You understand the risks
Even if you have $7,500 in unsecured debts and live in a state where a debt relief company operates, it’s important to consider the drawbacks.
- Once you enroll, you’ll stop paying your credit card companies. That means your credit score will take a serious hit — as much as 100 points.
- Your creditor may refuse to negotiate and send your account to collections. In some cases, they may sue for payment.
- Debt relief companies are for-profit businesses that charge 15% to 25% of the enrolled debt for their services. Some also charge a monthly fee to maintain a deposit account. So, even if you get your credit card company to forgive 50% of your $10,000 balance, you could owe more than $2,500 in fees.
- The IRS views forgiven debt over $600 as taxable income, and you may have to pay taxes on the portion your debt settlement negotiated away. If so, your creditor will file a 1099-C form.
Debt relief FAQs
Can debt relief help with auto loans?
Auto loans are secured debts that use the vehicle itself a collateral, so they’re not eligible for debt relief. It can help with credit card bills, medical debt or even private student loans.
How long does debt relief take?
The amount of time it takes a debt relief program to clear your balance debts on the company, the amount of debt and the creditor. Some companies advertise helping clients be debt-free in 24 to 48 months.
Does debt relief hurt your credit score?
Yes, debt relief will impact your credit score. Since you won’t be making payments, your score could drop by about 100 points, according to the NFCC. Once you clear your debts, however, it should begin to increase.
Why trust CNBC Select?
At CNBC Select, our mission is to deliver high-quality service journalism and comprehensive consumer advice to our readers, enabling them to make informed financial decisions. Every debt relief story is based on rigorous reporting by our team of expert writers and editors. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content independently of our commercial team and any outside third parties, and we pride ourselves on maintaining high journalistic standards and ethics.
Catch up on CNBC Select’s in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
