If you are stressed because of mounting debt, it may be time to evaluate your options. A debt resolution program can help lighten the burden and allow you to pay off debt faster. If you are struggling with large credit card balances and are only able to make minimum payments, it may be time to learn more about debt resolution programs.

According to a recent CNBC survey, 74% of working Americans say they’re stressed about their finances, while 61% say they’re living paycheck to paycheck. Some of the most common types of consumer debt for Americans are:

  • Mortgages
  • Student loans
  • Auto loans
  • Credit card bills
  • Medical bills
  • Personal loans

Debt relief programs can provide you with a clear path toward paying off your unsecured debt and regaining control of your financial life.

What Is a Debt Resolution Program?

A debt resolution program is a strategy that can help you repay your creditors without hassle. It is a solution that helps you avoid bankruptcy. A skilled debt negotiator can communicate with your lenders and credit card companies to negotiate on your behalf.

The goal of debt resolution is to reduce the amount of principal you owe and make payments more manageable. This option may not eliminate your debt entirely, but it allows you to avoid complete financial ruin and work your way toward stability. On average, you can expect to save up to 50% of your original enrolled debt before fees.

Do Debt Resolution Programs Work?

It’s easy to see why it’s crucial to regain control of your finances before your debt spirals out of control. But do debt resolution programs work? The success of the program will depend on a few factors. 

First, it is important to work with a reputed and accredited debt relief company. Check the reviews of the company at the Better Business Bureau and the Consumer Financial Protection Bureau and ensure they have a good track record.   

Debtors will also need to be committed to the program to ensure its success. While a debt resolution program can provide you with a way to pay off your debt, you will be ultimately responsible for making payments consistently.

Stick with the repayment plan so you can pay off debt sooner, avoid penalties, and complete the program successfully. Here are a few pros and cons to consider to ensure the program is right for you.

Debt Resolution Pros

  • The program can help you avoid bankruptcy.
  • It is less expensive when compared to the debt management plan and services offered by a credit counseling agency.
  • It allows you to settle your debts for much less than what you originally borrowed.
  • If you stay committed and complete the program, you will benefit from its full potential 

Debt Resolution Cons

  • The debt settlement process may take up to 48 months to complete.
  • You will only be able to get the full benefit of the program if you stay committed and complete the program.
  • It may have a short-term negative impact effect on your credit score.
  • There may be tax consequences on the savings you receive from settled debt.

When To Look For a Debt Resolution Program

Mounting debt can be demoralizing and can make it even more difficult to break free from the cycle of debt and spending. Here are a few indicators that you should consider a debt resolution plan:

  • You are consistently behind on your payments.
  • You are only able to make the minimum monthly payments.
  • You have experienced unemployment or a reduction in income.
  • You have accumulated debt because of unexpected expenses.
  • You have maxed out credit cards.
  • You have incurred late fees.
  • You’re getting debt collector calls for being late on payments.

Reasons People Get Into Debt

Once debt starts accumulating, it becomes increasingly difficult to regain control of the situation. There are a number of reasons people get into debt.

The Increased Cost of Living

After a record-high inflation level of 9.1% in 2022, in 2023, the inflation came down to 3.4%. This increase has wreaked havoc on household budgets.  

Financial Stress

Those who experience financial stress may find themselves overspending on unnecessary expenses.

Unemployment

Those experiencing unemployment may use credit cards to cover their expenses, adding to their debt.

Medical Expenses

Unexpected medical expenses can take a toll on your income and can result in staggering debt.

“Debt happens! Stop beating yourself up and look at your options,” encourages Teresa Dodson, a debt expert and the founder of Greenbacks Consulting. “Figure out what's right for you and take control of your finances,” Dodson says.

How Your Credit Score Is Affected by a Debt Resolution Program

If you have already missed payments, have late payment fees, maxed out your credit cards, and are struggling to make minimum payments, your credit score may already be lower. 

A debt resolution program may have a negative impact on your credit score, particularly in the beginning. However, it is important to consider that the program is usually recommended when you are on the edge of missing your minimum payments, starting to struggle to make payments, or have had a new financial hardship come up.

A debt resolution plan can help you settle your debt for much less than what you would have paid otherwise and become debt-free sooner.

How To Find a Debt Resolution Program

With so many companies offering debt settlement programs, finding the right debt solutions can be difficult. Here are a few things to consider:

  • Avoid companies asking for upfront fees.
  • Ensure the company covers the types of debt that you are currently struggling with.
  • Check the reviews of the company to ensure they have a good track record.
  • Ensure that the company offers debt settlement services for the state you reside in.
  • Choose a company that offers a free consultation with expert representatives.
  • Work with a company that is transparent about its pricing and process.

Debt Resolution Programs Can Help Provide Relief

Debt resolution can provide you relief from insurmountable debt, but it is crucial to work with a company that is transparent and has a good track record. Before you enroll in any program, check the terms and conditions and ensure you are comfortable with the program requirements.