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Earn a high-yield savings rate with JG Wentworth Debt Relief
Your Complete Checklist for Resolving Debt in the New Year
by
JG Wentworth
•
December 10, 2025
•
13 min
This information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.
The start of a new year brings fresh motivation to tackle financial challenges, and for many people, resolving debt sits at the top of their resolution list. Whether you’re dealing with credit card balances, student loans, medical bills, or a combination of debts, getting organized is the critical first step toward financial freedom. The following checklist will guide you through the essential tasks needed to create a realistic, actionable plan for becoming debt-free in the new year and beyond…
1: Gather all your financial documents
Before you can create an effective debt resolution strategy, you need a complete picture of your financial situation. Start by collecting every relevant document you can find. This includes:
- Credit card statements
- Loan documents
- Medical bills
- Collection notices
- And any other paperwork related to money you owe
Don’t forget to gather your income documentation as well:
- Pay stubs
- Tax returns
- Bank statements
And records of any side income will help you understand exactly how much money you have available to put toward debt reduction. If you receive irregular income from freelancing or contract work, collect at least three to six months of records to calculate your average monthly earnings.
Create a dedicated folder, either physical or digital, where you’ll store all these documents. Organization at this stage will save you countless hours of frustration later when you need to reference specific information or track your progress.
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2: Create a comprehensive debt inventory
With your documents assembled, it’s time to create a detailed list of everything you owe. For each debt, record:
- The creditor’s name
- The current balance
- The interest rate
- The minimum monthly payment
- The due date.
This inventory becomes your roadmap for the journey ahead. Many people are surprised to discover they have more debt than they realized once they see everything listed in one place. While this can feel overwhelming, remember that awareness is power. You can’t solve a problem you haven’t fully defined.
Consider using a spreadsheet to organize this information, as it will make calculations and updates easier. Include columns for the date you opened each account and any notes about special circumstances, such as promotional interest rates that will expire or loans in deferment.
Once you have your complete list, calculate your total debt amount and your total minimum monthly payments. These two numbers provide crucial baseline information for your debt resolution plan.
3: Pull your credit reports
Your credit reports contain detailed information about your debts and payment history. You’re entitled to one free credit report annually from each of the three major credit bureaus through AnnualCreditReport.com.
- Pull all three reports, as they may contain slightly different information.
- Review each report carefully for accuracy. Look for accounts you don’t recognize, incorrect balances, payments marked as late that you made on time, or debts that should have been removed because they’re beyond the statute of limitations. Credit report errors are surprisingly common and can negatively impact your credit score and your ability to negotiate better terms with creditors.
- If you find errors, dispute them immediately with the relevant credit bureau. They’re required to investigate and respond within 30 days. Correcting errors might improve your credit score, which could help you qualify for better interest rates or balance transfer options.
Your credit reports will also reveal whether any debts have gone to collections or if there are judgments against you. This information is crucial for prioritizing which debts to address first.
4: Calculate your debt-to-income ratio
Your debt-to-income ratio is a key metric that lenders use to evaluate your financial health, and it’s equally useful for your own planning. To calculate it, divide your total monthly debt payments by your gross monthly income, then multiply by 100 to get a percentage.
For example, if your monthly debt payments total $1,500 and your gross monthly income is $5,000, your debt-to-income ratio is 30 percent. Generally, a ratio below 36 percent is considered manageable, while anything above 43 percent suggests you’re overextended and may struggle to qualify for new credit.
Understanding this ratio helps you gauge the severity of your situation and set realistic expectations for how quickly you can pay down debt. If your ratio is very high, you might need to focus on increasing income or drastically cutting expenses to make meaningful progress.
5: Analyze your spending patterns
You can’t free up money for debt repayment without understanding where your money currently goes. Track every expense for at least one month, categorizing purchases into groups like:
- Housing
- Transportation
- Food
- Utilities
- Entertainment
- And miscellaneous spending
Be honest and thorough during this process. It’s easy to overlook small recurring charges like subscription services, but these often add up to significant amounts. Check your bank and credit card statements for automatic payments you may have forgotten about.
Once you have a clear picture of your spending, identify areas where you can cut back. The goal isn’t to eliminate all enjoyment from your life, but to redirect money from low-priority spending toward high-priority debt elimination. Even small reductions across multiple categories can free up substantial funds for debt repayment.
6: Choose a debt repayment strategy
Two popular approaches to debt repayment are the debt avalanche method and the debt snowball method.
- The avalanche method focuses on paying off debts with the highest interest rates first while making minimum payments on everything else. This approach saves you the most money in interest charges over time.
- The snowball method, conversely, targets your smallest debts first, regardless of interest rate. As you eliminate each small debt, you gain momentum and motivation, which can be psychologically powerful for people who need those quick wins to stay committed.
Neither method is inherently superior—the best choice depends on your personality and situation. If you’re highly motivated by numbers and efficiency, the avalanche method makes sense. If you need emotional encouragement to stick with the plan, the snowball method might serve you better.
Some people also benefit from a hybrid approach, perhaps paying off one small debt quickly for motivation, then switching to the avalanche method for the remaining balances. Choose the strategy that resonates with you, because the best plan is the one you’ll actually follow.
7: Create a realistic monthly budget
Your budget is the foundation of your debt resolution plan. Start with your total monthly income, then allocate funds to essential expenses like:
- Housing
- Utilities
- Transportation
- Food
- Insurance
- Minimum debt payments
What remains is your discretionary income—money you can choose to spend on wants rather than needs. The key to successful debt resolution is directing a significant portion of your discretionary income toward extra debt payments. This might require temporary sacrifices in areas like dining out, entertainment, or shopping, but remember that these cuts aren’t permanent—they’re just until you’ve made substantial progress on your debt.
Be realistic when creating your budget. If you set overly restrictive limits that leave no room for any enjoyment, you’ll likely abandon the plan within weeks. Build in a small amount for occasional treats or entertainment to prevent feelings of deprivation that lead to splurging.
Track your actual spending against your budget throughout the month and adjust as needed. Budgeting is a skill that improves with practice, so don’t be discouraged if your first few attempts aren’t perfect.
8: Set up automatic payments
Late payments damage your credit score and often trigger penalty fees, making your debt situation worse. Protect yourself by setting up automatic minimum payments for all your debts. This ensures you never miss a due date, even during hectic periods when you might forget.
If you’re putting extra money toward certain debts, you can still make those additional payments manually while the automatic payments handle the minimums. Most lenders allow you to set up autopay through their website, and you can usually choose your payment date to align with when you receive income.
Keep sufficient funds in your checking account to cover all automatic payments, and monitor your account regularly to catch any issues. Consider setting up low-balance alerts with your bank to warn you if funds are running short before a payment is scheduled.
9: Research debt consolidation options
Debt consolidation involves combining multiple debts into a single loan, ideally with a lower interest rate. This can simplify your payments and potentially save you money on interest charges. Common consolidation options include balance transfer credit cards, personal loans, and home equity loans or lines of credit.
- Balance transfer cards often offer promotional periods with zero or very low interest rates, typically lasting 12 to 21 months. If you can pay off your debt during this promotional period, you’ll save significantly on interest. However, these cards usually charge a balance transfer fee of 3 to 5 percent, and you’ll need good credit to qualify for the best offers.
- Personal loans for debt consolidation typically have fixed interest rates and repayment terms of two to seven years. They work well if you want predictable monthly payments and a clear timeline for becoming debt-free. Again, your interest rate will depend heavily on your credit score and income.
- Home equity loans offer another consolidation option if you’re a homeowner, often with lower interest rates because the loan is secured by your property. However, this approach carries serious risk—if you can’t make the payments, you could lose your home. Only consider this option if you’re confident in your ability to repay and have addressed the spending habits that led to the original debt.
- A Home Equity Cashout enables you to access the equity you’ve accumulated in your home without monthly payments, even if you don’t have perfect credit.
Before consolidating, carefully calculate whether you’ll actually save money after accounting for fees. Also ensure you won’t use your newly available credit to accumulate more debt, which would leave you worse off than before.
10: Investigate hardship programs
If you’re struggling to make even minimum payments, contact your creditors to ask about hardship programs. Many lenders offer temporary assistance to customers facing financial difficulties due to job loss, medical issues, or other legitimate hardships.
Hardship programs vary by lender but might include temporarily reduced payments, lower interest rates, waived fees, or a pause on payment requirements. These concessions can provide breathing room while you stabilize your financial situation.
Be prepared to explain your circumstances and provide documentation of your hardship. Approach these conversations honestly and professionally. Creditors would rather work with you to receive some payment than have your account go into default, so they’re often more flexible than people expect.
Keep detailed notes of all conversations with creditors, including the date, the representative’s name, and what was agreed upon. Follow up in writing to confirm the terms of any hardship arrangement.
11: Explore ways to increase income
While cutting expenses is important, there’s a limit to how much you can reduce spending. Increasing your income, however, has virtually unlimited potential. Consider what skills, time, or resources you could leverage to bring in extra money to accelerate debt repayment.
- Options might include asking for a raise at your current job, especially if you haven’t had one in several years and have taken on additional responsibilities. Look for overtime opportunities or consider taking on a part-time job or freelance work in the evenings or weekends.
- The gig economy offers numerous flexible options like rideshare driving, food delivery, freelance writing or design, tutoring, or selling items online. Even an extra $500 per month can make a significant difference in how quickly you eliminate debt.
- You might also consider selling items you no longer need or use. Look through your home for electronics, furniture, clothing, or collectibles that could be sold through online marketplaces. This provides an immediate influx of cash that you can apply directly to debt balances.
12: Review and adjust regularly
Your debt resolution plan shouldn’t be static. Review it monthly to ensure you’re staying on track and to make adjustments based on changes in your income, expenses, or circumstances. Perhaps you received a raise that allows you to put more toward debt, or maybe an unexpected expense required you to temporarily reduce extra payments.
Life happens, and flexibility is important. If you have a setback, don’t view it as failure—simply adjust your timeline and keep moving forward. The difference between people who successfully eliminate debt and those who don’t is usually persistence, not perfection.
As you pay off individual debts, redirect those payments to your next target rather than letting the money disappear back into general spending. This accelerating effect is key to building momentum in your debt repayment journey.
The bottom line
Resolving debt is rarely quick or easy, but it’s absolutely achievable with organization, commitment, and a solid plan. This checklist provides the framework you need to take control of your financial situation and work systematically toward freedom from debt.
Start with the first few items on this list today. You don’t need to complete everything at once—even small steps forward are progress. The key is to begin, stay consistent, and keep your focus on the goal ahead. Thousands of people successfully eliminate debt every year, and there’s no reason you can’t be one of them.
Your future self will thank you for the work you’re putting in now. Each payment brings you closer to financial stability, reduced stress, and the freedom to use your income for building the life you want rather than paying for the past. Begin this new year with confidence, knowing you have a clear path forward and the tools you need to succeed.
There’s always JG Wentworth…
Do you have $10,000 or more in unsecured debt? If so, there’s a good chance you’ll qualify for the JG Wentworth Debt Relief Program.* Some of our program perks include:
- One monthly program payment
- We negotiate on your behalf
- Average debt resolution in as little as 24-60 months
- We only get paid when we settle your debt
- Some clients save up to 43% before program fees
If you think you qualify for our program, give us a call today so we can go over the best options for your specific financial needs. Why go it alone when you can have a dedicated team on your side?
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* Program length varies depending on individual situation. Programs are between 24 and 60 months in length. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 43% before our 25% program fee. This is a Debt resolution program provided by JGW Debt Settlement, LLC (“JGW” of “Us”)). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NV, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt resolution services in their state. JGW is licensed/registered to provide debt resolution services in states where licensing/registration is required.
Debt resolution program results will vary by individual situation. As such, debt resolution services are not appropriate for everyone. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of the debt settlement services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment.
This information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that you consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.