Calculating a debt settlement plan

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A reader is deep in debt, but one plan is better than the other.

Question: My husband and I are not bad people, but we have close to $40,000 on seven credit cards that there is no way we will ever pay off. 

We are not spendthrifts. My husband was offered a lower-paying job when his company merged with another one, and he had to take it since there is no other work in our area. My salary as a secretary does not make up the difference. We earn just a little more per year than we have in debt.

Most of the credit card debt was to pay for home repairs after a severe storm. We do not have flood insurance, so we had to pay for everything to be fixed. Also, we paid for our daughter’s college after she could not get any more federal student loans.

I have read your site trying to understand what would be our best option: debt consolidation, a debt management program, or debt settlement. Do you have any advice?

— Jennifer in Florida

Howard Dvorkin answers…

This is one of the most common questions I’m asked by Americans who are deeply in debt. The terminology is very similar, and the definitions can be hard to understand.

Before I directly answer your question, Jennifer, I want to address the opening words of your email, “My husband and I are not bad people…”

Being in debt doesn’t make you a bad person. Ever. Even if you were financially irresponsible and ran up big bills to buy pricey meals and expensive clothes, you’ve committed no sin. You may have succumbed to temptation, but who hasn’t done that before?

I never judge anyone harshly for getting into debt. I do judge them for ignoring their debts or not learning how to fix the problem.

That’s not you, Jennifer. You fell into debt for understandable reasons, and now you’re asking reasonable questions about climbing out.

Your first stop is the report Debt Relief Programs for Every Type of Debt. However, I can reasonably predict you’re a candidate for debt settlement or even bankruptcy. Why? Because your debts are so large in relation to your income, traditional methods probably won’t help.

Consolidating your debts into one payment may still be too large for you to handle. Debt settlement allows you to pay less than you owe. Your creditors accept the lower amount because they have studied your situation and realize they may end up with nothing.

Bankruptcy is more drastic but also can apply to your circumstances. Before you do anything, click those bold links and read about the pros and cons of both options, which includes lowering your credit score for years.

Then I’d call for a free debt analysis from a certified credit counselor. Whichever option you choose, this is a big decision, and it involves more details than you offered in your email and I an offer in my answer.

You can call’s number at the top of your screen, but even if you don’t call us, call someone, Jennifer. You’ll be a good person for doing so.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

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Meet the Author

Howard Dvorkin, CPA

Howard Dvorkin, CPA

CPA and Chairman

Dvorkin is the author of Credit Hell and Power Up and Chairman of

Ask the Expert, bankruptcy, debt consolidation, debt management program, eliminate debt, save money

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