Debt Relief Glossary
Plain-language definitions of the terms you'll run into most often while researching debt relief.
C
Charge-Off
An accounting action a creditor takes to write off a debt as a loss, typically after about 180 days of non-payment. You still legally owe it. Learn more →
Collection Account
A debt that's been transferred from the original creditor to a third-party collection agency or debt buyer. Learn more →
Creditor
The company or individual you owe money to — the original lender, or a debt buyer who purchased the account. Learn more →
D
Debt Consolidation
Combining multiple debts into a single new loan, ideally at a lower interest rate — does not reduce the principal owed. Learn more →
Debt Management Plan (DMP)
A nonprofit credit counseling agency plan that lowers interest rates and consolidates payments while you repay the full balance. Learn more →
Debt Settlement
Negotiating with creditors to accept a lump-sum payment for less than the full balance owed. Learn more →
Debt-to-Income Ratio
Your total monthly debt payments divided by your gross monthly income, expressed as a percentage. Learn more →
Default Judgment
A court ruling entered automatically in a creditor's favor when you fail to respond to a lawsuit by the deadline. Learn more →
F
FDCPA
The Fair Debt Collection Practices Act — the federal law governing when, how, and how often debt collectors can contact you. Learn more →
H
Hardship Program
A temporary arrangement offered directly by a creditor — reduced rates or lower minimums — to help during a short-term financial setback. Learn more →
S
Secured Debt
Debt backed by collateral the lender can repossess if you default, such as a mortgage or auto loan. Learn more →
Settlement Offer
A negotiated amount a creditor agrees to accept as full payment for a debt, typically less than the original balance. Learn more →
Statute of Limitations (SOL)
The time period during which a creditor can legally sue you to collect a debt — varies by state and debt type. Learn more →
U
Unsecured Debt
Debt with no specific collateral backing it — credit cards, most personal loans, and medical bills are common examples. Learn more →
W
Wage Garnishment
A court-ordered deduction from your paycheck to repay a debt, generally only possible after a creditor wins a lawsuit. Learn more →