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Love and Debt: Why you need to talk about money

How to Stop Living Paycheck to Paycheck

Where to go for mortgage and debt help

What You Should Know About Debt Settlement

Create a plan to deal with medical debt

Options for Higher Education

Will Changes in Credit Reporting Affect You?

What to do if your medical bills are turned over to collections

What to do if your spouse can't pay his or her bills

What to do when a family member ruins your credit

Homeownership is possible

What you need to know about the IRS and collection agencies

Will being turned down for a store credit card hurt my credit?

Beware of credit repair

Debt Management versus Debt Settlement

How to get ahead of late fees

Is There a Service That Helps You Not Pay Bills

Is a Debt Owed

Patience is the key to furnishing a new home

How to split expenses with your partner

Will my boyfriend's bad credit affect me?

What to do if your account is turned over to collections

Personal Credit and Starting a Business

Finding Money to Reduce Your Debt and Improve Your Credit

Simple Keys to Personal Finance

Be vigilant to avoid telephone and internet scams

Debt Settlement

Understanding credit utilization

The pros and cons of skipping a payment

Keep an open line of communication with parents about their finances.

Make a Choice to Get Ahead Financially

What to do when a relative asks you for money

Should You Buy a Home Now or Wait?

The difference between debt settlement and debt management

The negative impact of paying a payment 30 days late

Stressed by Finances

How to navigate two significant financial decisions: starting a family and buying a home

How to advise someone close to you who is coming into a significant amount of money

Make a Conscious Decision on How to Spend Your Money

How do you know if you have a good credit score?

Americans spend more money eating out than on groceries

Having Good Credit Saves You Money

Developing good money habits with your first job

How to save for a home

How to Know if you are Ready for Home Ownership

When is the right time to buy a home?

You can improve your credit to buy a home

Plan a Memorable Vacation Without Incurring Debt

The Hidden Costs of Payday Loans

Be Wary of Credit Repair Services

Use Caution when playing the credit card game

What does it mean to say bankruptcy gives you a clean slate?

How your credit is affected by various debt options

Be wary of predatory small business loans

What to do if you fall behind on mortgage payments

Financing a College Education

Money, Credit and Relationships

Should you be concerned with your date's credit scores?

Best options for a small, short-term loan

How to help a relative who is always borrowing money from you

Skipping a Payment over the Holidays

What to do if you are overwhelmed by medical bills

Make your financial intention a financial goal you can achieve

What to do when a collector calls you

The difference between paying bills and managing your money

My wife and I have gone through some tough financial times, which eventually led us to file for bankruptcy.  Following this experience, I don’t ever want to use credit again, but my wife

What do I need to know to pay ahead on my mortgage?

What to do if you get an unsolicited credit card in the mail

What to do when moving in to share expenses doesn't work out

How your credit is affected by various debt options

Q. I'm struggling with my finances to the point where I need to make a radical change. I'm looking at all my options, including a debt management program, a debt settlement program and possibly even bankruptcy.  Can you explain how each of these options will affect my credit score?

A. The options you are considering are for those who are unable to make full monthly payments to their creditors. Given that you're struggling to the point where bankruptcy may be an option, your credit is already marred. Nevertheless, each of the options you're considering will influence your credit score in different ways over time.

Debt management programs are offered by credit counseling agencies. With a debt management program, you make reduced monthly payments and pay all of your creditors each month. As you pay-off one creditor, that payment is added to your other creditors until all of them are paid in full. Because you are making your payments, and because your payment increases over time, this is reflected positively on your credit report and in your credit score. What's more, paying your debts in full will positively influence your credit score.

A debt settlement program is offered by a debt settlement company. You send a monthly payment to the debt settlement company, rather than to your creditors. In the meantime, the settlement company holds your money in an account, but does not send it on to your creditors. As a result, your accounts will go further delinquent because your creditors are not getting a payment, and you will continue to accrue late fees. 

When you have enough money in your account, the debt settlement company makes a settlement offer to one of your creditors. Consequently, the creditor receiving payment will report this to the credit reporting agencies as a settlement, meaning that you did not pay the balance in full. What's more, when the rest of your creditors continue to go unpaid each month, this is reported negatively on your credit report. 

As for bankruptcy, there are several kinds available to consumers, including a Chapter 7 and Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, you repay a portion of your debt.  In a Chapter 7 bankruptcy, some of your debts are eliminated. The process is complex, and an attorney can best advise you on the differences between the two. 

Whether you file a Chapter 7 or a Chapter 13 bankruptcy, your credit report is not wiped clean. Bankruptcy is a matter of public record and is reported on your credit report; a Chapter 7 bankruptcy is reported for 10 years and a Chapter 13 Bankruptcy is reported for 7 years. In addition, a bankruptcy does not eliminate a past history of missed or late payments from your credit report.  

However you decide to proceed, it's essential for you to look at the big picture, knowing how the options you're considering will influence now—and in the years to come.

Bonnie Spain is the executive director of the American Center for Credit Education and Consumer Credit Counseling Service of the Black Hills. For more information, email

The material in this transmission is provided for personal, non-commercial, educational, and informational purposes only. ACCE makes no representations or warranties with respect to the accuracy or completeness of the contents of this transmission and assumes no responsibility for errors, inaccuracies, omissions, or any inconsistency herein. You should consult a professional where appropriate.