Dear Debt Adviser,
I finally have begun my career as a registered nurse for which I sacrificed my once admirable credit score of 760. Everyone always talks about how to pay down debt using the snowball effect. I have a family to support. I have about $60,000 in student loan debt and about $30,000 in unsecured debt. Here’s the thing. When I couldn’t work anymore while I was in school full time, I couldn’t make payments anymore to my creditors and now, of course, absolutely everything is in collections. I am seriously considering bankruptcy so I can concentrate on my student loan debt since I know that cannot be discharged. However, I would like to be a homeowner sometime in the next five years. Where do I even begin to be free of this burden I’ve accumulated and get a home for my family?
— Andrea

Dear Andrea,
Life is full of choices. You chose to advance your future career prospects and obtain a better life for yourself and your family at the cost of not paying the bills you have incurred and promised to pay. Choice made; day of reckoning postponed. What I am pleased about is that you are not whining about the consequences of your actions. The postponed day of reckoning is here now that you have income to pay your student loan debt. You are right to want to deal with your debts quickly and in the best way possible.

Oh, yes, also congratulations on finishing your schooling and beginning your career. You have chosen a career where you should never be without a position. That can’t be said for many careers these days. Now, let’s consider your financial future and how best to deal with your considerable amount of debt.

With your goal of homeownership in the next five years, I want to minimize any new damage to your already tarnished credit. I recommend exploring your other options before you consider bankruptcy. Although your old collection accounts already have caused significant damage to your credit, a new bankruptcy will make it worse. The more damage to your credit, the more difficult it will be to qualify for an affordable mortgage. This is especially true now when credit is tightening.

So, let’s explore your other options. First, you are right about your student loan debt not being dischargeable in bankruptcy. Still, I suggest that you keep an eye out for programs or other opportunities for loan forgiveness based on your job. Second, I want you to determine how much you can realistically afford to pay each month to satisfy your unsecured debt. It is very likely that your collectors will push for a quick payment or take you to court. Expect a repayment period of three years or less. That means total monthly payments of around $1,000. If that number causes you to reach for the tranquilizers or to hyperventilate, you’ll need to move on to another option. If you are still with me after reading that figure, you can choose to contact the collectors on your own and work out repayment plans with them, or you can contact a qualified nonprofit credit counseling agency that can assist you in negotiating with your collectors. A credit counselor may be able to get you repayment terms over five years at closer to $600 a month.

Settling your debt for less than you owe is also an option. However, I would recommend that you seek the advice and assistance of an attorney that specializes in dealing with collections rather than working with a debt settlement company. Attorneys must meet licensing and ethical requirements and other regulations that debt settlement companies do not. Your attorney will let you know what he or she believes the collectors will settle for and then you can make the decision to proceed or not. Future mortgage lenders would rather see that you paid what you owed in full. Still, settling your accounts for less than is owed will be viewed in a more positive light than a bankruptcy.

If you explore the options above and don’t believe either will work for you, then bankruptcy may be your only option.

Good luck!

Bankrate’s content, including the guidance of its advice-and-expert columns and this Web site, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this Web site is governed by Bankrate’s Terms of Use.

Read more Debt Adviser columns and more stories about debt management. To ask a question of the Debt Adviser go to the “Ask the Experts” page and select “Debt” as the topic.