DCP is definitely a negative hole in your credit reports for the next 7 years (assume you will take 3 years to fully repaid the DCP)....
No, that would be 6 years in your example: 3 to pay off the DCP, and 3 after the DCP is paid. Not 7.
....But if you don't take the DCP then the risk of bankruptcy is higher, and you're probably not paying off your debt within 6 years. The alternative to the DCP is not lollipops and rainbows.
I
really don't understand this argument, this fear. It seems quite irrational. If you're a candidate for the DCP, you have onerous, expensive debt that's bogging you down or worse. That could, at any moment, tip you over the edge into bankruptcy. So why the fear of damaging a credit history that's already badly damaged and very likely to get worse if you don't act? You're not in any position to take on more debt, and if you have a down payment for a home saved up then you're c-r-a-z-y if you don't run to your creditors and pay off that ~28% credit card debt immediately...and
then spend some more time debt free and accumulating another down payment.
Does. Not. Compute.