What do debt relief companies actually do with your monthly payments?

MoneyWatch: Managing Your Money What do debt relief companies actually do with your monthly payments? We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. .chip { background-image: url('/fly/bundles/cbsnewscore/images/chip-bgd/chip-bgd-moneywatch.jpg'); } By Angelica Leicht Angelica Leicht Senior Editor, Managing Your Money Angelica Leicht is the senior editor for the Managing Your Money section for CBSNews.com, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications. Read Full Bio Angelica Leicht April 29, 2026 / 10:11 AM EDT / CBS News Add CBS News on Google Debt relief companies don't simply pass your monthly payment along to creditors — at least not initially, anyway. Skaman306/Getty Images Household and credit card debt levels are higher than ever right now, and, in turn, millions of Americans are carrying credit card balances they can't pay down. And, the burden is only growing as the interest charges compound at high rates month after month, so many are turning to debt relief companies for help. These companies specialize in helping borrowers find solutions to their high-rate debt, and one common approach is to try to make repayment more affordable for borrowers by having a portion of their debt forgiven. Enrollment is straightforward: Sign a contract and make one monthly payment to the debt relief company instead. For people coping with expensive and growing debt, the idea of debt forgiveness is generally a welcome one, as it offers an expert-driven path out of a major financial hole. But the mechanics of what actually happens to the money you pay the debt relief company once it leaves your bank account are far less obvious than the pitch suggests. Debt forgiveness doesn't work like a traditional payment plan, after all, where funds flo...