Expanded Debt Relief Access Is an Important Solution to America’s Affordability Crisis

August 7, 2026

Global Holdings

Since 1979, productivity has far outpaced typical worker pay. Households closed the difference with debt. Source: Economic Policy Institute.

Editor’s note from Global Holdings

We are sharing this analysis from the American Association for Debt Resolution (ACDR) of a new study by the Financial Services Innovation Coalition (FSIC), The Consumer Financial Health Crisis. Figures shown are illustrative unless otherwise sourced.

As the United States marks its 250th year, fewer Americans believe the promise still holds. In a 2026 AP-NORC poll, only about a third said the American Dream still holds true today.

The numbers behind that feeling are stark. Since 1979, worker productivity has grown 92.4 percent. Typical worker pay has grown 33.6 percent. People produce more and keep less of what they make.

$18.8T

Total U.S. household debt, 2025 Q4

11.32%

Of disposable income going to debt payments, and rising

$37.93/hr

Living wage for one adult in San Jose, vs. a $16.90 minimum

That gap did not disappear. Households filled it with debt. The FSIC study draws a clear conclusion: for millions of families, debt is no longer a temporary tool. It has become how they afford everyday life.

“What was once an income-supported consumption system has evolved into a credit-supported survival system.”

FSIC, The Consumer Financial Health Crisis

How the math traps people

A household carrying $30,000 to $37,000 in unsecured debt at 27 to 30 percent APR, making near-minimum payments, can pay more than $96,000 over time. That is an illustrative figure, and it is roughly three times the original balance. The same household can stay in debt for about three decades.

The pattern repeats at smaller balances. On a single $6,000 credit card balance at 30 percent APR, total interest can rival or exceed the original principal.

FSIC also warns that new technologies, including artificial intelligence, may amplify financial instability and accelerate debt dependence across a far broader segment of the workforce.

Choosing a path out

When unsecured debt becomes unmanageable, households face a limited set of resolution paths. Each carries tradeoffs in cost, duration, credit impact, and eligibility.

Illustrative cost by resolution path

Resolution path	Illustrative total cost	What it does	Key tradeoff
Minimum payments	~$96,000+	Avoids default; no court process	Highest total cost; debt drags on for decades
Credit counseling / debt management plan	~$37,500–$42,500	Reduces interest; structured plan	Repays 100% of principal; monthly fees; covers only participating credit-card debt
Debt settlement (current law)	~$25,000–$31,000	Reduces principal; 2–4 year resolution	Fees ~20–25%; credit impact; possible tax on forgiven debt
Debt settlement (with tax relief or insolvency exclusion)	~$22,000–$27,000	Same as above, without taxable income on the forgiven amount	Fees ~20–25%; credit impact
Chapter 13 bankruptcy	~$14,000–$18,000	Legal stay; structured plan; keep assets	3–5 year plan; credit impact for 7 years; court oversight
Chapter 7 bankruptcy	~$1,500–$3,500 (direct fees only)	Most debt discharged; fast	Full cost is far higher: 10-year credit damage, higher borrowing costs, rental and insurance screening effects

Assumes $30,000–$37,000 in unsecured debt at 27–30% APR. Minimum-payment totals assume the most common issuer formula, the greater of $35 or 1% of the balance plus that month’s interest and fees, at 27% APR. Figures illustrate the structural cost of minimum-payment dependence; in practice accounts often default or charge off before payoff. Settlement reflects typical 40–60% principal repayment plus fees.

Chapter 7 direct fees reflect attorney and filing costs only and exclude the long-term economic cost of a 10-year credit impairment. Settlement outcomes and the bankruptcy and debt-management comparisons draw on Dobbie (2021), a Harvard Kennedy School analysis of roughly 450,000 debt-settlement enrollees commissioned by the American Fair Credit Council; that study observes enrollees only and cannot establish the causal effect of settlement.

Why access to debt relief matters

Among these options, debt settlement and bankruptcy reduce the principal owed. Credit counseling and consolidation lower the interest rate or restructure payments, but repay the balance in full.

For households that cannot repay in full but want to avoid bankruptcy, debt relief is a federally regulated path. Governed by the Federal Trade Commission’s Telemarketing Sales Rule and by state law, a provider negotiates with creditors on the consumer’s behalf to resolve enrolled unsecured debt for less than the amount owed. Results vary by creditor and circumstance, and fees apply.

Many consumers who enter debt settlement already have impaired credit, including delinquencies and charge-offs. The credit impact at the start of a program often reflects damage that predates it.

When hardship becomes unsustainable, people need legitimate, well-regulated options. ACDR accreditation holds providers to standards beyond baseline state and federal requirements, giving consumers added confidence that they are on a path they can trust.

Debt relief is not a substitute for responsible lending or sound financial planning. It is a pathway back to stability for households the current system has left with few good choices.

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Source: Financial Services Innovation Coalition, The Consumer Financial Health Crisis: Wage Stagnation, Rising Costs, and the American Household Debt Trap (July 2026). Underlying data: Economic Policy Institute; Federal Reserve Bank of New York; MIT Living Wage Calculator; AP-NORC Center for Public Affairs Research. This article is provided for general information and is not legal, tax, or financial advice.