Dear Liz: There seems to be an abundance of companies now offering debt reduction, debt settlement, and debt consolidation programs. Are there any differences in these programs? Some of these companies offer a program in which high credit card balances and loans are combined and significantly reduced, and the debtor would make a one-time payment to said company. What are the advantages and disadvantages of this type of program? What would be the effect on the debtor’s credit history?

Reply: If a company promises to help reduce the total amount you owe, this is called debt settlement. Typically, you stop paying your debts and instead make payments to the debt settlement company, which tries to negotiate a deal with your creditors.

Settling debts can have a significant negative impact on your credit scores, and you could be sued by creditors who are unwilling to settle. The process can take several years and you may have to pay taxes on any amount of debt forgiven as this is considered taxable income for you. Once you add the business fees, the amount you save through debt settlement may be less than you expect.

If you are considering debt settlement, consult a bankruptcy lawyer first (the National Association of Bankruptcy Lawyers offers referrals), as bankruptcy is often a faster, cheaper, and safer way to erase a crushing debt. The most common type of bankruptcy, Chapter 7 liquidation, typically takes three or four months, stops collection actions, legally wipes out many types of debt, and allows you to start rebuilding your credit immediately.

If a business promises to lend you money to pay off your loans and credit cards in full, it’s called debt consolidation. Debt consolidation can make sense if you can get a lower interest rate than what you are currently paying, if the payments are affordable, and if the loan allows you to get out of debt faster. However, you will need to be wary of debt consolidation companies that charge large upfront fees or charge high interest rates. If you have bad credit, you are probably better off going to a nonprofit credit counseling agency rather than paying high rates for a debt consolidation loan.

Two husbands. What advantage?

Dear Liz: I am 66 years old and recently widowed after a five year marriage. I was previously married and divorced after more than 20 years. I contributed to Social Security as a professional for 20 years. How do I know how to apply for Social Security benefits? Do I just have to declare my benefits? Should I wait until I am over 70? Should I apply for spousal benefits and, if so, for which husband?

Reply: Let us take this last question first. You are only eligible for spousal or divorced spouse benefits if the worker you are applying for is still alive. Spousal benefits can be up to half of what a worker would get at full retirement age. If the worker is deceased, on the other hand, you may be eligible for survivor benefits, which can be up to 100% of the worker’s benefit.

For example, you may be entitled to three different types of benefits: your own retirement pension, a divorced spouse’s benefit based on your ex’s record (because you had been married for at least 10 years), and a survivor benefit based on your ex’s record. your late husband’s record (because you had been married for at least nine months at the time of his death). Normally, you lose the ability to claim a divorced spouse’s benefit when you remarry, unless the second marriage ends in divorce, annulment, or death, like yours.

Which one to claim and when will depend on the details of your situation. You can call Social Security at (800) 772-1213 to get estimates of what you will get on each file. Consider using a paid service such as Social Security Solutions or Maximize My Social Security to help you determine the best strategy for claiming benefits.

Learn more about health insurance choices

Dear Liz: I enjoyed your columns on the choices between Traditional Medicare and Medicare Advantage. I have a terminology question: what is the difference between a Medigap policy and a supplemental policy? I have traditional health insurance and a supplemental plan that covers deductibles and co-payments that Medicare does not cover. From your article, it appears that a Medigap policy is doing the same. Please clarify and keep up the good work.

Reply: Medigap and supplemental policy are two terms for the same product: an insurance policy sold by private insurers to cover “gaps” in Medicare coverage. If you have traditional health insurance (also known as original health insurance), it is generally advisable to have a Medigap supplemental policy as well.

However, you cannot purchase a Medigap policy if you are on Medicare Advantage. Medicare Advantage is also provided by private insurers, but is meant to be an all-in-one alternative to traditional health insurance, rather than a supplement.

Liz Weston, Certified Financial Planner, is Personal Finance Columnist for NerdWallet. Questions can be sent to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “contact” form at