If you’re struggling with excessive debt, there are several approaches to consider—each with its
own risks and benefits. For the purposes of this discussion, let’s assume that increasing your
income isn’t an option so we can focus on practical alternatives.

Review Your Budget
Start by thoroughly examining your budget. Understanding your income and expenses is crucial,
as it determines which debt relief options are available. Free online tools, such as Cambridge
Credit Counseling’s MyMoney Portal, can help you create and manage your budget. Most debt
solutions will require this step.

Credit Counseling
If you have enough income to cover basic expenses but little left over, nonprofit credit
counseling is a safe choice. Certified counselors can enroll you in a Debt Management Plan
(DMP), which is ideal for credit card and unsecured debts. DMPs typically reduce interest rates
(often to around 8% or lower) and aim to eliminate debt in under four years. They do not cover
mortgages, rent, or car payments.

Bankruptcy
Bankruptcy may be appropriate if you cannot meet monthly living expenses and have no way to
increase your income. Qualification depends on a “means test” comparing your income to
state-specific thresholds. Contrary to common belief, most assets (home, car, retirement funds)
are protected in bankruptcy. Consult a reputable bankruptcy attorney for guidance.

Debt Consolidation Loans
A debt consolidation loan can help pay off high-interest credit card debt, but only if you change
the spending habits that led to debt. Avoid accumulating new debt after consolidating, as this
can worsen your financial situation.

Debt Settlement
Debt settlement is risky and generally not recommended. It involves negotiating with creditors
to pay less than owed, which can severely damage your credit score, incur high fees, and create
tax liabilities. Success is not guaranteed.

Choosing the Right Option
There is no universal solution. The best first step is to contact a reputable nonprofit credit
counseling agency for a free, personalized debt review. Agencies like Cambridge Credit
Counseling offer expert guidance to help you choose the best path for your situation. Call (888)
254-4925 or click here to schedule your appointment online.