Debt relief guide: choosing a way out that fits your state

Updated November 9, 2026

Debt relief covers very different things, from a lower interest rate on the same debts to wiping debts out in bankruptcy. The right one depends on how far behind you are, what you own, and the rules in the state where you live.

Step 1: Write down what you owe

List every debt with its balance, interest rate, minimum payment and whether you're behind. Mark the ones secured by property, such as a mortgage or car loan, because those follow different rules from credit cards, medical bills and personal loans.

Then compare your total monthly payments with your take-home pay. Our debt-to-income calculator does the math the way lenders do.

Step 2: Check what your state protects

Your state's debt rules can change which option makes sense:

• How long creditors can sue. Time limits run from 3 years in states such as Maryland and New Hampshire to 10 years in Rhode Island. In most states a new payment can restart the clock, but Maryland and Minnesota don't allow that once the time is up.
• How much of your pay is at risk. Federal law caps garnishment at 25% of take-home pay, and many states protect more. Massachusetts limits it to 15% of gross pay and New Jersey usually to 10%, and North Carolina, Pennsylvania, South Carolina and Texas don't allow wage garnishment for most consumer debts.
• What else is protected. Every state protects some of your home equity, car, retirement savings and household goods, and some protect part of your bank account. The same protections decide what you'd keep in bankruptcy.

If little of what you have can be taken, you may be what lawyers call judgment-proof. Collectors can still call and sue, but a court judgment may not get them much. Talk to legal aid before paying anyone to protect money the law already protects.

Step 3: Match the option to your situation

• Debt consolidation replaces several payments with one at a lower rate. It needs decent credit and works only if you stop adding new card debt.
• A debt management plan through a nonprofit credit counseling agency usually cuts card rates and fees and gives you one payment for three to five years. You repay the full balance.
• Debt settlement gets creditors to accept less than you owe. It usually means falling behind first, which hurts your credit and can lead to lawsuits.
• Bankruptcy wipes out most unsecured debt (Chapter 7) or puts you on a court-supervised plan (Chapter 13), and stops most collection as soon as you file.

Step 4: Check who you're dealing with

Many states license or register debt management and debt settlement companies, and North Carolina bars most companies from charging to settle or adjust debts at all. Your state page says which office to check with. Wherever you live, walk away from anyone who:

• Wants a fee before settling or changing any of your debts
• Promises to make your debts disappear or to stop every lawsuit
• Tells you to stop talking to your creditors
• Says it's part of a new government program

Not sure which fits?

Tell us about your debts and we'll connect you with providers who can help. It's free, and there's no obligation.