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Should I Use Credit Counseling, Do It On My Own, or File Bankruptcy? – Carol

“Dear Steve,

I currently have $34,411 in credit card debt, with most cards being close to the limit. In addition, I have $23,422 in an auto loan. My gross pay per month is $5772 and my net pay per month is $3259.

My living expenses (including rent and car payment) are about $2300 a month. My monthly payments for my credit cards total a little under $800 a month. So, I’m looking at about $150 extra income a month.

My payments are on time and accounts current. I have already paired down to the bare minimum when it comes to personal finances–don’t have a home phone, just got rid of cable and internet, etc.

There is a possibility that once September arrives, I will be able to find part-time work to provide a little additional money each month ($200 or more).

Should I consider becoming part of a Debt Management Program (such as CCCS) or should I just try to dig out on my own? Should I consider Chapter 13 instead of a DMP? Thanks!


Dear Carol,

Thank you so much for asking me for help and advice.

The most critical component here is one you did not mention. How much are you able to save each month and also save for retirement?

Financing a budgetI understand you’ve cut the budget to the bone but I’m worried you may not have left enough room for the most important obligations of an emergency fund and retirement savings.

Digging out of debt without saving for both at the same time is financial suicide. Accidents and unexpected financial surprises happen and without the emergency fund those surprises will land back on credit and erode progress you make.

Without saving for retirement now it can cost you a million dollars or more later when you need it most.

Please let me know what your current saving strategy is and while you are at it, use the calculator below to better understand the long term impact of not saving for retirement while you are getting out of debt.

Debt Repayment Calculator

What Will Debt Repayment Cost You in Retirement?

What Will Debt Repayment Cost You in Retirement?

This calculator demonstrates the future retirement financial loss you may experience when electing to repay your debt with an extended repayment program offered by creditors, credit counseling or debt settlement, rather than intervene on your debt with solutions like bankruptcy which terminate the debt quickly and allow you to resume saving again for retirement.

The calculator solves two problems.

Cost of Payment Plan in Retirement Dollars: This is the value of the retirement funds that you could have invested rather than repay your debt through an extended repayment program.

Future Lost Retirement Value: This is the amount you will lose in retirement from entering into a repayment plan to deal with your debt.

If you want to just see the amount lost from the payment plan, leave the “Monthly Payment After Payment Plan” box at 0.

Here is an example:

Current Age: 25
Monthly Payment: 300
Monthly Payment After Payment Plan: 0
Length of Payment Plan: 5
Rate of Return: 10
Estimated Retirement Age: 70

Cost of Payment Plan in Retirement Dollars = $23,231.12
Retirement Cost of Payment Plan = $1,247,526.55

What This All Means

If you elected to pursue some other solution, like bankruptcy, to discharge your debt quickly, you would not make monthly payments into an extended repayment plan. Those funds could instead be used to save towards retirement.

In this example, if our 25 year old debtor decided to enter into a credit counseling or debt settlement program they would repay their debt but that plan would cost them $23,231.12 in retirement funds that would be worth $1,247,526.55 when they eventually retired.

The purpose of this calculator is to not talk you out of credit counseling or debt settlement but to assist you to make a more informed decision about the future costs to you.

Debt Repayment Impact on Retirement Calculator
Current Age:Length of Payment Plan (Years):
Monthly Payment:$Rate of Return (%):
Monthly Payment After Payment Plan:$Estimated Retirement Age:

Current Age: Enter your current age.

Monthly Payment: Enter monthly payment of debt plan.

Monthly Payment After Payment Plan: Enter any payment you expect to make on a monthly basis into your retirement plan after you get out of debt. Leave this as 0 if you just want to see the future cost of lost retirement from a repayment plan.

Length of Payment Plan: Enter the number of years the repayment plan will take.

Rate of Return: Enter the rate of return you anticipate your retirement plan to have. Keep in mind that a good stock index mutual fund can return 10% or more.

Estimated Retirement Age Age: The age you anticipate retiring at.

And if you don’t think worrying about saving for retirement is important, please read The Saddest Avoidable Mistake People Make When Getting Out of Debt.

Why This is Important

Government data shows 41 percent of Americans aged 55-64 have no retirement savings account.

For those in this age group who do have a retirement account, the median account balance is only $103,200. In addition, an increasing number of Americans are retiring without pensions.

The Employee Benefit Research Institute (EBRI) finds that 44 percent of baby boomers will fall short of adequate retirement income for basic expenses and uninsured health care costs.

Women, in particular, have an increased likelihood of outliving assets due to, among other things, lower savings and lower private pension coverage. – Source

You don’t want to wind up broke in retirement.

Please post your responses and follow-up messages to me on this in the comments section below.

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About Steve Rhode

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.
  • Carol

    Steve, so sorry that I left out that information. I am putting a little bit of money ($50-100 month) in savings, but I have had some bills lately that were unexpected and wiped out my emergency fund. So, building that up is very important to me, but as you said, I don’t have much wiggle room. Also, I am a teacher and put away money in a 403b each pay and also have my retirement through the state.

    • Steve Rhode

      Are you contributing up the the maximum matching amount at work?

      • Carol

        They don’t match our 403b amount. I am not putting enough away, I do know that. Would love to increase it, but I just don’t have the extra to do that right now.

      • Steve Rhode

        In that case the answer is crystal clear. You need to meet with a local bankruptcy attorney and learn more about what bankruptcy would mean for you. See

        We MUST put saving first. Otherwise you’ll be out of debt and eating dog food in retirement.

        Without the ability to build an emergency fund of at least several thousand dollars you are putting yourself in a terrible financial position.

        It’s just math.

      • Carol

        Thank you so much for your time!

      • Steve Rhode

        Carol. I’m not being flip here with you or suggesting bankruptcy lightly. I’m trying to care for the 82 year old you as best I can.

        Favor, if I’ve been able to help, please find the “Rate Our Site – Leave a Testimonial” button above the comments and leave me some feedback.

        Big hug.

        Keep me posted.

      • Carol

        I knew you weren’t being flip. :) I have a consultation appointment with a local attorney tomorrow to discuss my options. Thank you again for your advice.

      • Steve Rhode

        I wrote this today after thinking about your situation.

        I’m rooting for you. I’m your biggest cheerleader. Go Carol!

      • Carol

        After discussing with the attorney and realistically looking at the pros and cons, I have decided that filing for Chapter 13 is my best option at this point. (I make too much and didn’t pass the means test for Chapter 7.) Still feeling a bit scared about it, but know in my head it is my best hope for a new start. Thank you for everything.

      • Steve Rhode


        If you have any hesitation or wonder if you might be able to qualify for a chapter 7, then get a second opinion with a different bankruptcy attorney. A second opinion will help you to feel confident you are doing the right thing and nobody is going to be upset with you for doing that.

        I don’t want you to be scared. I want you to be confident.

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