What Are My Options When Faced With Mounting Debt?

When a consumer has credit card debt, personal loans, and/or medical bills that have begun to stack up and they are beginning to feel overwhelmed & stressed out wondering if they are going to be able to pay them off, it usually results in that consumer asking the question: “What are my options?”

The first 3 things to do is to take an inventory of (1) all your debts and (2) what your expected income is going to be the next 3-6 months and (3) examine the best options for your particular situation. Another helpful exercise to conduct is to see if some of your monthly expenses can be reduced or eliminated. What subscriptions can be canceled? What expenses can be eliminated? Ask yourself, how can we lower our monthly expenditures?

If you are certain that you can’t dig yourself out of this whole of debt, then you need to look at other options and examine them to see which option is best for you & your situation. The most common options are:


Refinancing your home and taking out hard earned equity that has built up over the last several to many years. We typically don’t recommend taking a secured asset (home equity) and move it into an unsecured debt (credit cards, etc.). Especially since Texas consumer protection law allows you to have 100% homestead protection. This means that you could have a $1 million home paid off and nothing can be touched regarding this home – 100% of your equity is safe and no one can come after it.


Taking out a personal loan to see if you can consolidate all of your debt into one affordable and lower monthly payment hopefully at a low interest rate. This is definitely an option; however, it often delays the inevitable and typically doesn’t lower your debt. It just makes the number of years it will take to pay off your debt many years longer while maybe giving you short-term relief. Plus, it will free up your credit cards (they will now have a zero balance) and many consumers will feel the urge to once again use them and stack up new credit card debt in addition to the new personal loan.


Debt settlement is an option many consumers do not look into, but this option is becoming more acceptable & commonplace because there is federal regulation in the debt settlement industry since October 27, 2010 (over 13 years ago). Debt settlement will take your total unsecured debt (credit cards, personal loans, medical bills, etc.) and negotiate it lower by 30% to 60%. For example, if you have $20,000 in total unsecured debt, a debt settlement company can typically settle it for around $10,000 to $14,000. Keep in mind that your $20,000 in total unsecured debt will usually take 5-6 years to pay off (assuming you stop using all credit cards) and the total payoff will amount to approximately $34,000 based on an average interest rate of 17% and paying the minimum payment each month. Comparing paying $34,000 versus $14,000 is a huge difference. In addition, the average time it takes to complete debt settlement is 3 years versus paying off the total debt in 6 years. The one main drawback of debt settlement is that your credit score will go down around 100 points and you will not be able to be accepted for any new loan applications. However, our clients can repair their credit over the next 1-2 years and get their credit score higher than it was before and with zero credit card debt.

Learn More


Credit Counseling is yet another option & choice consumers have when they want/need help with their debt. This is not a very popular option though since credit counselors will literally determine when & where you can spend your money. They establish a strict budget and a client must follow their outline or the plan will not continue. No one wants to be told when & where they must spend their money – it’s a little humiliating. However, credit counseling will often lower interest rates and lower the monthly payment a consumer needs to pay offering some relief in a monthly budget for many people.


The final option, and the most extreme, is filing for bankruptcy. This option is not even available for many consumers because the bankruptcy laws were overhauled many years ago and if you earn over the median income in your state, then you cannot qualify to even file bankruptcy. In Texas, the median income is $66,000 (as of 2023) so if you earn more than this, you can’t even think about bankruptcy. However, if your income is significantly lower than the median, bankruptcy is a legitimate consideration for you. But you must think about the ramifications: (1) many employers now look at your credit to see if they want to hire you and a bankruptcy stays on your credit for 10 years; (2) client must take financial literacy classes to make sure they understand how to budget & plan financially for the future; (3) most rental management companies now look at credit reports to see if they want to rent out places so it’s possible you could not rent an apartment or home where you’d like; (4) in the future, if consumer wants to finance any kind of purchase, the interest rate will be extremely high since creditor will assume you are a big risk; (5) any creditor that is listed on a bankruptcy filing may challenge the bankruptcy and file an adversarial hearing. If this occurs, consumer will have to prove at a hearing that he/she cannot pay back this particular creditor.