I Need to Get Out of Debt But I Don’t Know What to Do and I Want to Avoid Bankruptcy


Dear Steve,

I am $80,000 In credit card debt. I have about $60k in 0% credit cards of which I transfer back and forth for a 4% fee every 1-2 years. I have about $20k on a card I actively use and try to pay down for about 10% Interest. I don’t have the income to pay off much and still live at the same time. A lot of this is medical debts or a result of medical problems, not shopping too much.

I am afraid to declare bankruptcy and I am also very afraid to trust one of these debt consolidation companies – all of which I feel are just another scam. (What benefit do they add? I rent and cannot afford to damage my credit. (Credit is impeccable besides high cc debt).

I do not own anything but was hoping one day in the future…. also I don’t want prospective employers to see I declared bankruptcy. I really am at loss. I don’t know who to trust as it seems like everyone is trying To sell a product to you.

What is the downside to using a debt consolidation company? Damages credit rating etc??

What are the downsides to bankruptcy?

What would you do if you were me? (Again I have NO credit Problems or any defaulted payments. It’s all perfect. Just tons of debt).


You are stuck in a very common rut. You are trapped in the need to take action but the fear of taking the wrong action is holding you back. Debt problems are simple math problems wrapped in emotion. A lesson you are painfully learning.

First off I would suggest you use The Amazing How to Get Out of Debt Calculator to compare your options. The online calculator will gives you a comparison of the pros and cons of each plan.

It sure sounds as if you are hesitant about bankruptcy. Most people are because they don’t know the truth about bankruptcy. But the issue about bankruptcy is not to believe everything you’ve heard about it.

Is paying off your debt through a credit counseling or debt consolidation loan a better option? Well it depends on a number of factors. While it might “feel better” today the pain it might cause in lost retirement can be huge. Use this online calculator.

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It doesn’t really matter to me that your credit is impeccable because that’s not the most important issue to consider. Credit can be easily rebuilt. And is your credit really impeccable with a high debt to income ratio that hurts you or the constant shuffling of cards? Those actions can lower your credit score.

The primary issue here is your continued living on the sharp edge of a financial disaster. If you are currently saving for retirement and building up your emergency fund is far more important that the next 12-24 months of your credit.

While you don’t want prospective employers seeing you filed for bankruptcy, is that really a bigger fear than setting yourself up for massive failure in retirement? Maybe it is? Only you can answer that question.

If you are currently unable to save for retirement, build up your emergency savings account and protect yourself now, any repayment plan that leaves you exposed like that will be a big risk.

So let’s deal with facts.

The reality is if you wanted to put your debt behind you in the fastest period of time for the least expense and most legal protection, then bankruptcy would be the logical solution. You should read Those That File Bankruptcy Do Better Than Those That Don’t and So You Are Going to File Bankruptcy. That’s Good News. Congratulations.

You are right where your creditors want you. You are on time with payments and just shuffling along making them money through interest or balance transfers. Your current plan is the dream of creditors. Creditors care about maximizing their profit, not your finances.

And I totally understand that you are unsure of who to trust to give you good advice. It seems like it is darn near impossible to find someone who can give you a comprehensive overview of your total situation and options available. You don’t need a salesperson, you need a debt coach who can guide you through. You need someone experienced who can help you make the best decisions possible that includes reality and your goals.

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Frankly I would suggest you work with an independent debt coach like my friends Damon Day or Michael Bovee. They will help you evaluate your overall situation and help you wade through the muck to find a better future.

Or, you can keep doing what you are doing and expect the future to look much like today.

It’s time to live through facts, not fear.


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

Do you have a question you'd like to ask me for free? Go ahead and click here.

Damon Day - Pro Debt Coach

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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6 thoughts on “I Need to Get Out of Debt But I Don’t Know What to Do and I Want to Avoid Bankruptcy”

  1. I am in $65,000 credit card debt. I own nothing and have no assets. I have no defaulted payments. Most of the $ is in 0% balance transfer cards. I spoke to a personal bankruptcy attorney and I CANNOT declare Chapter 7 bankruptcy. I earn over $40,000 and in NEW YORK State, as a single person, it disqualifies you. I would have to quit my job to be able to declare bankruptcy. That’s not an option as I have cancer and need my health insurance. I paid a debt counselor for a consult. He said the only way is to default on all my cards and hope for a settlement, not a lawsuit; I feel really uncomfortable with the risk associated with the defaulting process (best case scenario is to pay half of the debt) and the fees I would have to pay. Another problem is I need to have access to at least one credit card (i can’t default on them all). As far as I understood, this is a problem as the other credit agencies can see I am paying one, meaning I am more likely to get sued than a settlement offer. As far as I can see because I cannot get unbiased advice from anyone (everyone wants to sell you their product) is that I should borrow against my 401K and pay half of the total debt off and keep the rest in 0% balance transfer cards, I cant think of anything else to do here? I am really at a loss.

  2. I have one more questions I am so very confused and feel totally overwhelmed.

    To recap, I am in about $70,000 of Credit Card debt. No defaulted payments, most of the debt is in 0% balance transfer accounts. I live in NYC and earn about $90,000. My income is over the limit to qualify for CHAPTER 7 bankruptcy – in NY State a single person must earn under $40,000. I have no assets so Chapter 13 seems pretty useless. The debt counselor thinks I should default on all the payments and then pay him 15% on all the total amount of the debt that he settles (this will include the sky high interest rates of approx. 6 months of defaulted payments and all other fees). I have one other option: to borrow from my 401k and pay off half of my debt and then keep $30,000 in zero % balance transfer accounts. I need access to credit (this is non-negotiable) and from what I understand if you default on your credit cards, you can’t be paying on one card faithfully and defaulting on all the others as they can see all your credit transactions – this might bring a lawsuit as then they can see I have access to funds. I am absolutely overwhelmed and have no idea what to do. Everyone is trying to sell you their product or service. I really just want to declare Chapter 7, but I would need to quit my job. What do I do?


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