1. List All Your Debts

Start by collecting:

• Recent credit card and loan statements
• Medical bills
• Auto loan paperwork
• Student loan info
• Mortgage or rent details
• Any outstanding personal loans

If you’re unsure where to find everything, your credit report can help. Visit AnnualCreditReport.com to get a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion). You can do this as often as once a week for free.

Use a notebook, spreadsheet, or budgeting app (many free options are available) to list out the following details for each debt:

Include all types of debt—even small balances or debts to friends/family. The goal is to see the full picture.

Once you’ve entered all your information, total up your outstanding balances. This number gives you a starting point for building a plan.

2. Prioritize Which Debts to Tackle First

Some debts are more urgent than others because they either cost you more over time or carry serious consequences if ignored. These are the debts to focus on right away:

• High-interest debts: These include credit cards and payday loans. Because of their steep interest rates, they grow quickly and can become unmanageable if you only make minimum payments.
• Secured debts: These are tied to property you own—like a mortgage or auto loan. Falling behind can mean losing your home or vehicle.
• Debts in collections: These can potentially lead to credit damage, lawsuits, or wage garnishment.

3. Build a Simple Budget

Next, figure out how much you can realistically put toward your debt each month. This can be a more involved process, but you might start by:

• Listing your total monthly income (from all sources)
• Subtracting your essential expenses (like rent/mortgage, utilities, food, transportation)
• Seeing what’s left over for debt payments

4. Choose a Debt Payoff Strategy

Once you know which debts to focus on and how much room you have in your budget, it’s time to decide on a payoff strategy. Here are two tried-and-true strategies that work well for most people:

Avalanche Method

Focus on paying off the debt with the highest interest rate first while making minimum payments on all other debts. Once that one’s gone, move to the next-highest rate. This method saves the most money over time because you reduce the amount you lose to interest. It’s a great choice if you’re motivated by long-term savings.

Snowball Method

Focus on the debt with the smallest balance first. Pay it off as quickly as you can, then roll that payment into the next-smallest debt. This method builds momentum by giving you small, early wins, which is helpful if you feel overwhelmed or need quick progress to stay motivated.

5. Use Free Tools From the VA

As a veteran, you don’t have to figure all of this out on your own. The Department of Veterans Affairs (VA) offers a range of free tools and support services to help you take control of your finances and make informed decisions.

Veterans Benefits Banking Program (VBBP)

Through the VBBP, the VA partners with trusted organizations like the National Foundation for Credit Counseling (NFCC) and the Association for Financial Counseling & Planning Education (AFCPE) to provide up to three free sessions of one-on-one financial counseling.

Counseling can help with:

• Creating a budget that fits your income
• Managing and reducing debt
• Reviewing and understanding your credit report
• Avoiding predatory lending and financial scams

Financial Literacy Tools

The VA offers a collection of self-guided tools and resources that can help you improve your financial situation.

These tools cover:

• Budget planning
• Debt payoff options
• Retirement planning
• Financial goal setting

FINVET – National Veterans Financial Resource Center

FINVET is an online hub for veteran financial education.

Here, you’ll find:

• Budgeting guides
• Debt management tips
• Scam prevention advice
• Tools for caregivers and spouses

VA Home Loan Cash-Out Refinance

If you have a VA-backed mortgage and home equity, you may be able to refinance into a larger loan and take out cash to use for paying off unsecured debt.

How It Works

You replace your existing mortgage with a new VA loan and withdraw a portion of your equity as cash. Some homeowners use this to pay down higher-interest debts.

What to Consider

• This option may offer a lower interest rate than other types of borrowing, but that depends on current rates and your credit profile.
• It turns unsecured debt (like credit cards) into secured debt backed by your home, which can increase your risk if you’re unable to keep up with payments.
• Closing costs and loan terms can vary, so it’s important to review all details carefully.

It’s a good idea to speak with a VA-approved lender and weigh the long-term costs before using your home equity to pay off other debts.

Debt Consolidation Loan

A debt consolidation loan is a personal loan used to pay off multiple debts, leaving you with one fixed monthly payment.

How It Works

You apply for a personal loan—often through a bank, credit union, or online lender—and, if approved, use the funds to pay off existing debts.

What to Consider

• Depending on your credit and lender, you may be able to secure a lower interest rate than what you’re currently paying on your other debts, but this isn’t guaranteed.
• You’ll typically make fixed monthly payments for a set term, which can make budgeting easier.
• Fees, loan terms, and eligibility criteria can vary widely between lenders.

Veterans may want to check with credit unions or lenders that offer military-friendly terms, as they may provide more flexible options.

Balance Transfer Credit Card

A balance transfer card allows you to move debt from one or more credit cards to a new card with a low or 0% promotional interest rate.

How It Works

If approved, you can transfer existing credit card balances to the new card. During the promotional period, your payments may go mostly (or even entirely) toward the principal, rather than interest.

What to Consider

• Promotional offers vary and are subject to credit approval. 0% APR is typically offered only for a set period, which is often 12 to 18 months.
• Many cards charge a balance transfer fee (usually 3–5% of the amount transferred).
• If the balance isn’t paid off before the promotional period ends, a higher interest rate may apply.

This can be a helpful short-term solution if you have a plan to pay off the balance within the promotional window, but it may not be suitable for long-term debt.

What Is Debt Settlement?

With debt settlement, the goal is to negotiate a lump-sum payment that’s less than the full balance of your debt. This typically applies to unsecured debts like credit cards, medical bills, and personal loans.

You can try to negotiate directly with creditors, or you can work with a debt settlement company that negotiates on your behalf. If successful, the creditor agrees to consider the debt resolved after the reduced payment.

Pros and Cons of Debt Settlement

Potential Advantages

• It may allow you to resolve debts for less than the full balance.
• It can help you avoid bankruptcy in some cases.
• You’ll typically make just one monthly payment (if working with a program).

Important Considerations

• Creditors aren’t required to settle, and negotiations can take months.
• Your credit score may decline during the process, especially if you’ve stopped making payments.
• Settled debt may be considered taxable income by the IRS.

Scams and Red Flags to Watch Out For

Unfortunately, veterans are often targeted by debt relief scams. Watch out for companies that:

• Charge large upfront fees (which is illegal under FTC rules)
• Guarantee that they can settle your debt for a specific amount or percentage
• Don’t clearly explain the risks, including credit score impact

To protect yourself, you can:

• Look for companies accredited by organizations like the American Association for Debt Resolution
• Ask for all terms in writing before signing anything
• Read customer reviews and check for complaints on sites like the Better Business Bureau (BBB), Trustpilot, or your state attorney general’s website

What Is Credit Counseling?

Credit counseling is a free or low-cost service offered by nonprofit organizations. You’ll speak one-on-one with a certified financial counselor who will:

• Review your income, expenses, and debts
• Help you create a budget
• Explain your options for paying off debt
• Answer questions about credit scores and financial planning

What Is a Debt Management Plan (DMP)?

If you and your counselor decide a more structured approach is needed, they may suggest enrolling in a Debt Management Plan (DMP).

How It Works

• You make one monthly payment to the credit counseling agency.
• The agency then distributes that money to your creditors, typically at reduced interest rates or waived fees.
• The plan usually takes three to five years to complete.

What to Consider

• A DMP is not a loan.
• Your credit accounts will often be closed while you’re in the plan.
• You typically must commit to not opening new credit accounts while enrolled.

When to Consider Bankruptcy

You might want to speak with a bankruptcy attorney if:

• You’re unable to keep up with minimum payments on most or all of your debts
• Collection calls, wage garnishment, or lawsuits are making your situation unmanageable
• Other debt relief options—like consolidation, settlement, or credit counseling—haven’t helped or aren’t available
• You’re facing foreclosure or vehicle repossession and need legal protection

Types of Bankruptcy

The two most common types for individuals are:

Chapter 7 (Liquidation)

This is often used by people with low income or few assets. If you qualify, many unsecured debts (like credit cards and medical bills) may be discharged. Some property may be sold to repay creditors.

Chapter 13 (Repayment Plan)

This allows you to keep your property and repay debts through a court-approved plan. This is typically for individuals with regular income who want to catch up on secured debts like a mortgage or car loan.

Veteran-Specific Protections: The HAVEN Act

Veterans have additional protections under the HAVEN Act (Honoring American Veterans in Extreme Need), which was signed into law in 2019.

Under this law, VA disability benefits are excluded from the bankruptcy means test. This makes it easier for veterans to qualify for Chapter 7 bankruptcy if needed.

This means that your service-connected disability income won’t be counted as disposable income when the court decides if you qualify for debt discharge.