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.