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.

See also  How Can I Continue My Education With All This Debt?

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


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10 thoughts on “Should I Use Credit Counseling, Do It On My Own, or File Bankruptcy? – Carol”

  1. 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.

      • 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.

        • 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 https://getoutofdebt.org//52401/everything-you-always-wanted-and-needed-to-know-about-bankruptcy

          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. 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.

          • 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.

          • 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.

          • Carol,

            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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