Glossary
Debt relief glossary
Plain-English definitions of the terms you'll hit when researching debt relief. Full definition pages with examples and official sources are rolling out from our content pipeline.
- Financial hardship letter
- A written explanation of why you cannot keep up with payments, used to request relief.
- Deficiency balance
- The unsecured amount still owed after a repossessed or foreclosed asset sells for less than the debt.
- Judgment lien
- A claim a creditor places on your property after winning a judgment.
- Cease and desist letter (debt)
- A written FDCPA request telling a collector to stop contacting you - it does not erase the debt.
- Credit counseling
- Free or low-cost help from a nonprofit agency to budget and set up a debt management plan.
- Wage garnishment exemption
- State/federal protections that shield part of your wages from garnishment.
- Debt validation letter
- A written request forcing a collector to prove a debt is yours and accurate.
- Secured debt
- Debt backed by collateral (mortgage, auto loan) - cannot be settled like unsecured debt.
- Debt consolidation
- Combining multiple debts into one payment via a loan or balance transfer; you repay the full balance.
- Fair Debt Collection Practices Act (FDCPA)
- Federal law limiting how third-party collectors can contact you and barring harassment.
- Income-driven repayment (IDR)
- Federal student-loan plans that cap payments at a share of your discretionary income.
- Form 1099-C
- The IRS form for canceled debt of $600+, which may count as taxable income.
- Unsecured debt
- Debt not backed by collateral (cards, personal loans, medical bills) — the only kind settlement works on.
- Debt management plan (DMP)
- A nonprofit-counselor repayment plan: one monthly payment, often reduced interest, full principal repaid.
- Debt settlement
- Negotiating with creditors to accept less than the full balance, on unsecured debt.
- Offer in Compromise (OIC)
- An IRS program that lets some taxpayers settle federal tax debt for less than the full amount — strict eligibility, most do not qualify for large reductions.
- Statute of limitations on debt
- The state-set time window during which a creditor can sue to collect — after it passes, the debt is time-barred.
- Wage garnishment
- A court order directing your employer to withhold part of your pay to repay a judgment debt — capped at 25% of disposable earnings for most consumer debts.
- Charge-off
- When a creditor writes a debt off as a loss after prolonged non-payment — you still owe it, and it can still be collected or sold.
- Merchant cash advance (MCA)
- Business financing structured as a purchase of future sales, repaid by fixed daily withdrawals — not legally a loan, so it sidesteps interest-rate caps.
- Student loan refinancing
- Replacing existing student loans with a new private loan at a different rate — refinancing federal loans into private debt permanently ends federal protections.
- Debt settlement
- Negotiating with creditors to accept less than the full balance owed, usually on unsecured debt.
- Debt management plan (DMP)
- A repayment plan through a nonprofit credit counselor that consolidates payments and often lowers interest.
- Unsecured debt
- Debt not backed by collateral — credit cards, personal loans, medical bills. The only kind debt settlement works on.
- Wage garnishment
- A court order directing your employer to withhold part of your paycheck to repay a judgment debt.