My friend Debby is in a hole. She owes more than $40,000 on her credit cards. She makes about $65,000 a year. You don’t need to be a CPA to see that math doesn’t work for long.
I am one, though. So she asked me what to do.
Here’s the part that matters: Debby isn’t reckless. Some of that debt is plain overspending, sure. But a big chunk of it comes from helping her daughter, who’s seven months pregnant and working a job that doesn’t pay much.
Debby did what a lot of parents would do. She reached for the plastic. The problem is the plastic reaches back.
The average card that carries a balance now charges about 20%, according to the Federal Reserve. On $40,000, that’s roughly $8,000 a year in interest alone — about $700 a month — before Debby knocks down a single dollar of what she borrowed.
So she asked me the only question that counts: Can I dig out on my own, or do I need help? Here are the seven steps I walked her through.
1. Track where the money’s actually going
Before we touched on the debt, I told Debby to do the boring thing first: track every dollar she spends for a month. Not what she thinks she spends — what she actually spends.
Almost nobody knows. The money leaks out in $12 and $40 chunks that never register. Find the leaks, and you find the cash to attack the debt.
Here’s the shortcut I gave her. Pull your last few months of bank and credit card statements, black out anything personal — account numbers, your name, your address — then feed them to an AI and ask it to sort your spending into categories and flag where you’re overspending.
It’ll do in seconds what used to take an accountant an afternoon. Debby turned up a couple of hundred dollars a month she didn’t even realize she was spending.
2. Add up every dollar you owe — and don’t flinch
Next came the thing she’d been avoiding: writing down the debt itself. Every card. Every balance. Every interest rate. Every minimum payment.
It’s a miserable hour. It’s also the most important one. You can’t beat a number you refuse to look at.
Most people carrying serious card debt have never seen the total in one place. It lives in scattered statements and a low-grade dread. Put it on a single page, and the enemy finally has a face.
3. Stop the bleeding
No plan works while the balance is still climbing. So rule one for Debby: The cards go in a drawer. Or the freezer. Or in my freezer. Wherever she won’t reach for them on autopilot.
This is the hard part, because it collides with the reason she’s in debt — her daughter. Helping a pregnant kid isn’t a line item you cut like a streaming subscription.
So we didn’t pretend otherwise. We built the daughter’s support into the plan as a real, capped number that Debby can actually afford — paid from income, not from a credit line at 20% interest.
Generosity you finance at card rates isn’t generosity. It’s a debt wearing a halo.
4. Do the math — can she even dig out?
This is where being a CPA earns its keep. Before you pick a strategy, you have to know whether the strategy can win.
Here’s the trap Debby was in. Paying only the minimum feels responsible. It isn’t — it’s a trap the banks built on purpose.
According to Bankrate, someone with just $5,000 in card debt at 20% APR who pays only the minimum stays in debt for around 23 years and hands the bank about $7,700 in interest.
Now multiply that mess by eight. That’s Debby.
But there’s good news buried in her file: Her credit is still good, and she’s current on her payments. That’s huge. It means she still has options that vanish the moment she falls behind.
We ran the numbers, and the verdict was yes — Debby can dig out. Just not at 20%. The rate is the whole game.
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5. If she can dig out, cut the rate first
When it comes to digging out of debt, experts obsess over the snowball versus the avalanche — pay the smallest balance first for the motivation (snowball), or the highest rate first (avalanche) to save the most money. Behavioral researchers have found the snowball keeps more people going, because early wins are addictive.
But for Debby, that debate is almost beside the point. Her debt is all credit cards at similar sky-high rates. The biggest lever, by far, is knocking the rate down. Three ways to do it:
First, ask — and there’s a right way to phrase it. A LendingTree survey this year found that 84% of cardholders who asked for a lower rate got one — an average cut of more than six points.
Yet the vast majority never bother to ask. Seriously? The worst they can say is no.
Second, transfer. With good credit like Debby’s, a 0% balance-transfer card can erase interest for 12 to 24 months, so every dollar hits principal instead of the bank. The catch: Watch the transfer fee, and have a real payoff plan before the promo ends.
Third, consolidate. A fixed-rate personal loan from a bank or credit union — often well below 20% — rolls the cards into one payment you can actually finish.
Cut the rate, then throw every spare dollar at the balance. That’s how $40,000 goes from a 20-year sentence to a three- or four-year project.
6. If you can’t cut the rate, call a nonprofit credit counselor
Debby’s plan hinges on lowering that rate. But what if it doesn’t work? What if her transfer gets denied, the consolidation loan falls through, and the card companies won’t budge?
That’s not the end of the road. It’s the moment to call a nonprofit credit counselor.
Here’s how it works. A legitimate nonprofit agency reviews your budget and sets up a debt management plan — one monthly payment, with your card rates negotiated down, often into single digits.
You still repay what you borrowed, but far faster and for much less interest. Your credit takes little damage, and the Consumer Financial Protection Bureau (CFPB) says it usually won’t leave you with a tax bill.
The one I’d point Debby to is the National Foundation for Credit Counseling, a nonprofit network that’s been at this since 1951. The first budget session is free. (Full disclosure: I used to be an advisory board member of a local Consumer Credit Counseling Service office. But that definitely didn’t influence my recommendation.)
One warning. Don’t confuse nonprofit counseling with the for-profit debt settlement outfits you see advertised. Those tell you to stop paying your cards so they can negotiate.
Per the CFPB, that torches your credit, racks up fees, and can get you sued. For someone like Debby, who still has good credit intact, it’s the last thing she needs.
7. The last resort — bankruptcy
Nobody wants to hear this word. But I won’t lie to a friend, and I won’t lie to you: Sometimes the math is simply unwinnable, and bankruptcy exists for exactly that reason.
There are two main avenues. Chapter 7 can wipe out unsecured debt like credit cards, if your income falls under a limit that varies by state. Chapter 13 sets up a court-supervised repayment plan over three to five years.
It’s not the end of the world, and it’s not a moral failing. The system hands people 20%-interest cards and then acts shocked when they drown. If you’re truly underwater, meaning you can’t make your minimum payments, talk to a bankruptcy attorney — the CFPB notes that many will have a first consultation free.
For Debby, we’re going to try to avoid this. She has income, good credit, and a workable plan. But she asked me an honest question, so she got the honest answer: Bankruptcy is the last resort, not the first step.
Where Debby landed
Debby walked in thinking she had two options: White-knuckle it forever, or blow up her credit. She actually had a better option sitting in plain sight.
Her plan: Track the leaks, cap her daughter’s help at a number she can afford, cut the rates by asking the banks, check on balance transfers to zero-interest cards, as well as a consolidation credit union loan, then destroy her debt with every spare dollar.
If this is unworkable, a nonprofit counselor is her backstop. Out in about four years either way — credit intact, no settlement, no bankruptcy.
The lesson isn’t really about Debby. It’s that the scariest debt often looks unbeatable only because nobody’s done the math. Do the math. Then attack the rate. That’s the whole secret — and it’s one the card companies would rather you never learn.
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