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I’m Working With a Credit Counseling Group But I’m Broke. – Cat

“Dear Steve,

I shared most of it on your post about bankruptcies, DMP, and Debt Settlements. I have not been able to establish an emergency fund. I have no money nor credit obviously for a bankruptcy attorney. I still have about $25,000 in debt to pay (and this does not include a student loan that I have not begun making payments on for about $46,000). I own my home. Have been in a DMP for about 2 years.

I am wondering what my wisest course of action is: continue with the DMP, seek bankruptcy (if so, what kind, how, and with what funds?) or is there another option I’ve not considered.

By wisest course, I mean, over the long haul, not just the immediate short run. Will my credt rating improve once my DMP is finished and I have a better debt to income ratio? Will I be able to re-establish my once VERY good (725) credit?


Dear Cat,

I believe your original comment gave me some additional information that is important as well.

For me the issue comes down to some very important facts, you have no savings, can’t save and you are the single mother of four children. While I applaud your desire to want to repay your debt I’m left wondering, at what cost?

In your debt management plan with the credit counseling group you’ve got another three to four more years to go to pay off your debt that way. But as the mommy bird here I can’t see how that course of action, which leaves you living month-to-month, is the prudent thing to do to protect your brood.

For me, the ability to save and have money in savings or an emergency fund, whatever you want to call it, is of utmost importance. Without your ability to build that safety net at this time you are moving you and the kids closer and closer to a financial disaster you will not only not recover from, but that will eliminate all the years of struggles trying to repay.

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All it will take is one big car repair, one illness, one accident, or one unexpected event and without an emergency fund, two, three or more years of debt repayment will be wasted and go down the drain because the odds of your DMP failing are pretty high. And that’s just a game I don’t think is responsible to play.

I would much prefer to see you save at least $100 a month even at this time before you committed one penny towards any repayment. And the reason why you are not doing that is because with your commitment to pay your DMP. Your priorities are shuffled the wrong way.

A few questions for you.

  1. How much is your DMP payment each month?
  2. If an accident or illness happened, how would you pay an unexpected $500 bill at this time?
  3. Which is more important to you, your credit score, or the safety of your kids?

For many years now I’ve watched many people make the wrong decision about what to do in financial trouble based upon what other people might think about them or to preserve a fictitious number called a credit score.

Here is some homework, I really need for you to find a local bankruptcy attorney you like, make an appointment and go talk to them. I need for you to learn more about what bankruptcy would mean for you. You can go and learn without committing yourself to anything.

So let’s say you did not have an obligation to continue those DMP payments anymore and you were given a legal fresh start. What would you do with those DMP payments and if you had that money available would it provide more safety and security for you and the kids?

As far as the credit score goes, that’s easy to rebuild. It’s a whole lot easier than having a sick child for whom you can’t buy the needed medicine because you were never able to save the money. Heck, in the past two weeks with my wife sick we’ve spent an unexpected $350 on meds and doctor visits. This stuff really happens.

Forgive my bluntness here. My goal is to set you straight and I’ve got to be direct and honest with you to make you see the light.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.


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.

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

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About the author

Steve Rhode

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.


  • My DMP payment is $317/mo. If it were possible to get a legal fresh start, not lose my home or my car (obviously I have to get work and we have no viable public transportation in my area), I would definitely give it some serious consideration. The last two years of living on a cash only basis have taught me a great deal but I have not been able to put that contingency fund asided (something I always had before I met my ex).
    I will definitely do my homework. Thanks for providing a link to a local bankruptcy attorney. I will have an update for you by the end of the month. Again, thanks. I’ve always thought my approach was the smartest one in the long run but your site has been very, very insightful for me and has given me good reason to rethink my strategies to date and for the future.

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