Debt Relief in Colorado: Facts, Programs, and Solutions

Key takeaways:

• Consumers in Colorado have more credit card debt than the national average.

• Fortunately, there are a variety of debt relief options available in Colorado.

• Once you learn about these options, it’s time to choose which is right for you and set the process in motion

On paper, people in Colorado might seem to have a financial advantage, with incomes higher than the national average. In reality though, debt problems happen to residents of all 50 states, including many in Colorado. If that’s you, know that by learning about your options, you’re taking the first step in the right direction right now.

Fortunately, there are ways to get debt relief help in Colorado, and they could help you take back control of your finances.

Average credit card debt in Colorado

The average income in Colorado is higher than the national average. Coloradans also have a higher burden of credit card debt. 

As of the end of 2024, Colorado residents owed an average of $6,954 in credit card debt. That’s higher than the national average of $6,580. With credit card interest rates often above 23%, this creates a constant strain on household budgets. Trying to keep up with high interest charges on top of the cost of living can mean the debt hole keeps getting deeper.

How credit card debt affects people of different ages

No age group is immune to this problem:

• Credit card balances tend to grow throughout most of a person’s adult years, peaking between ages 55 and 74.

• Despite having lower credit card balances, most people under 35 have less wealth, and often are still learning to handle credit. As a result, young adults are more likely than other age groups to have seriously overdue credit card payments.

• While people aged 75 or over tend to have low credit card balances, they also face the challenge of making ends meet on declining incomes. 

In other words, credit card debt problems can hit at any time. That’s why it’s wise for adults of all ages to know about their debt relief options.

Debt settlement: A powerful solution in Colorado

What can you do when you’ve tried just about everything, but can’t keep up with your credit card bills? When you’re being harassed by debt collectors, and threatened with being sued for payment?

As hopeless as things can seem, debt settlement might give you a way out. 

Debt settlement involves negotiating with creditors to reduce the amount you owe. This can be a win-win situation for you and your creditors. Once a creditor understands that you can’t afford to fully repay your debts, they may realize that they’re better off getting a partial payment before other creditors use up all your financial resources.

Debt settlement is a serious step. The negotiations can be difficult, and it’s important to understand the potential consequences, including that forgiven debt could count as taxable income. However, if missed payments are ruining your credit and you can’t figure out how you’ll pay the full amount you owe, debt settlement may be your best option.

Is debt consolidation the right choice?

Another debt relief option to consider is debt consolidation. This may be the right solution if you feel you can still pay off all your debts with a more affordable payment schedule.

With debt consolidation, you clear debts by borrowing from another source. This helps you reduce the number of monthly payments you have to make. Another big advantage is that it could also make your payments more affordable.

Debt consolidation works best when you can do it with a lower interest rate. This could get you a lower monthly payment. Or if you keep making the same monthly payment, you could save on long-term interest charges. 

A debt consolidation loan could be a great option if you have a lot of high-interest credit card debt. Credit card interest rates are so high that debt consolidation offers a range of options for paying less interest. These include:

• Pay off your credit card debt with a personal loan

• Transfer your current credit card balances onto a 0% balance transfer card

• Use a home equity loan to pay off high-interest debt.

For debt consolidation to work well, you need strong enough credit to qualify for a debt consolidation loan. 

Other debt relief alternatives in Colorado

In addition to debt settlement and debt consolidation, here are some other options to consider if you’re struggling with debt payments:

• Hardship programs. Not all creditors offer these, and they rarely advertise them. But if you explain your difficulties, a creditor may offer you this type of program. Hardship programs don’t reduce the balance that you owe—they make adjustments to make the debt easier to pay. They may delay or reduce your monthly payments, suspend late fees, or lower your interest rate.

• Income-driven repayment plans. These are available for federal student loans. As the name suggests, the loan servicer recalculates your monthly payments based on how much you earn. This can make payments affordable even if your income is low. On some plans, the lowest required monthly payment is zero.

• Credit counseling. A qualified credit counselor can outline a range of debt relief options for you. They may also set up something called a debt management plan (DMP). In a DMP, you make a single monthly payment to the credit counseling agency, who then distributes it to your creditors. The payment must be enough to clear all of your unsecured debts in three to five years. You typically have to agree not to use credit cards while you’re in the program.

• Bankruptcy. In bankruptcy, a court determines what you can afford to pay based on your income and assets. The court then requires creditors to accept the amounts it has determined, which could be zero. In a Chapter 7 bankruptcy, you might have to give up some of the things that you own. In a Chapter 13 bankruptcy, you'll be on a payment plan for three or five years, depending on your income level.

Understanding the statute of limitations (SOL) on debt in Colorado

If you fail to make a debt payment, a creditor has a limited amount of time to sue you for payment. This time limit is called a statute of limitations, or SOL.

The length of the SOL varies from state to state. In Colorado, the SOL for debts stemming from a written agreement (like a loan or credit card agreement) is six years. That time period starts from when your last payment first became overdue.

If the SOL has expired, the creditor can no longer legally sue you for the debt. However, that doesn’t mean the debt is canceled. It only means that the creditor can’t take you to court for it unless the statute of limitations is restarted. It’s possible to restart the clock by making a partial payment or, in some cases, even acknowledging the debt.

Taking the next steps in Colorado

Knowledge is power. Knowing your debt relief options means you can start taking back control of your finances. 

The next steps are to:

• Decide which debt relief option is best for your situation

• Start the process to put that solution into effect

No debt relief process will solve your problem overnight. But once you set the process in motion, you’ll breathe easier knowing you’re moving in the right direction.