Compare the Costs of a Credit Counseling DMP, Settling Debts for Less, and Bankruptcy for Debt Relief

Not sure what to do about bills I can no longer keep up with. Everywhere I read seems to point out either joining a credit counseling program for debt consolidation, or starting a debt settlement program. I am also told that I can do bankruptcy. I like how you have pointed out on your site that there are hard costs and fees to talk and ask questions about debt settlement, but I am not seeing much about debt consolidation or bankruptcy.

What does debt settlement cost vs a credit counseling DMP consolidation and bankruptcy

—Need Help

There is quite a bit more to comparing the 3 debt relief options that people typically seek outside assistance with, which are; a credit counseling services Debt Management Plans (DMP), Debt Settlement Programs, and Bankruptcy. There are benefits and drawbacks to each debt solution. You are way ahead of many people researching debt relief by focusing on the cost benefit of each first.


A debt relief company, and people working for it, are often selling you a specific brand of debt help and can often be found to over emphasize program benefits and gloss over drawbacks. I write about that on this and other sites often. That’s not on point with your question about costs, so….

How can you determine which debt relief option is the right fit for a given set of cash flow limitations?

The reality of a person’s debt situation should first focus on your  financial capabilities.


Compare the dollar benefit of a Debt Management Plan vs. Debt Settlement vs. Chapter 7 Bankruptcy.

Assuming a person has $20,000.00 in unsecured debt they can no longer afford to keep current, here is how the costs shake out for each of the three debt relief solution:


How much a Debt Management Plan costs:

Based on a monthly payment calculation of 2.0% of your enrolled credit card balances (and other conforming unsecured debt), you would pay $400.00 each month for 60 months for a total of $24,000.00.

How much a Debt Settlement Program costs:

Based on negotiating the debts down to less than half of what was originally owed, and assuming fair and affordable fees for the service, you may pay $10,000.00 over a recommended 24 month period.

How much a Chapter 7 Bankruptcy costs:

Based on a straight chapter 7 bankruptcy filing where there are little to no nonexempt assets to contend with, you could pay costs and fees between $1500.00 to $2000.00. Your filing and discharge of unmanageable debts is typically completed in 3 to 6 months.

Which option looks the most appealing and provides the best economic benefit from a strict dollars and sense perspective?


This dollar/time/relief outline is not generally discussed by the people and companies offering you a debt management or debt settlement plan. It by all means should be – but instead you might here how bankruptcy ruins your credit for 10 years (not true), or how settlement will get you sued and hurt your credit for 7 years (also not true if you are a suitable candidate).


There are certainly other things each person should consider and compare for debt relief solutions.

Do the math and focus your attention on that first. Don’t rely on others to inform you using carefully scripted words and phrases that hit your emotions, but do not scratch the surface of assisting you in becoming truly informed.


Aside from a cost benefit analysis of each debt relief method, many people will focus on credit reporting and credit score affects. There is a good amount of misconceptions out there about how credit counseling, debt settlement and bankruptcy will impact credit scores and access to new credit products. Overhyping and/or downplaying either the limited or major impacts to your credit score is a good example of how sales people, counselors and experts attempt to focus your attention on the particular brand of relief they provide. More details about credit report and credit score impacts with these 3 debt relief options can be learned here:


I hope this information is helpful. If you cannot qualify with a credit counseling agency for a debt management program, and there is something about your situation that has you looking at debt settlement as a way to avoid bankruptcy, consider the CRN membership program. We offer affordable education and supplemental detailed information and unlimited access to one on one coaching to resolve your debts in a quick and affordable way. You can call and talk to a CRN specialist at 800-939-8357 ext. 3.


Anyone with questions and comparisons about the 3 options covered above is welcome to post in the comments below for feedback.

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