Debt Relief Programs: What's Legit and What's a Scam

The FTC receives over 100,000 complaints per year about debt relief scams. The good news: the legitimate options are well-defined. Here's how to tell them apart.

Legitimate

• Nonprofit credit counseling: NFCC-member or FCAA-member agencies. Free initial review. Debt Management Plans typically cost $25–50/month and cut card APRs to 6–10%.
• HUD-approved housing counselors: Free help for mortgage debt and pre-foreclosure.
• State bar lawyer referral: Bankruptcy attorneys (free consultations are standard).

Use caution

For-profit debt settlement companies are legal but expensive (15–25% of settled debt) and tank your credit. Only consider if you've already defaulted and can't afford monthly payments.

Red flags (FTC)

• Demands upfront fees before settling any debt (illegal)
• Guarantees specific results ("we'll cut your debt 60%")
• Tells you to stop communicating with creditors entirely
• Pitches a "new government program" — there is no federal debt forgiveness program for personal debt
• Promises to remove accurate negative items from your credit report (impossible under FCRA)

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DebtFreely provides general educational information about debt payoff strategies. It is not financial, legal, or tax advice. Consult a qualified professional for advice specific to your situation.