Don't panic.

Do what you can to move cards to lower interest, even asking the companies your with to lower them.

You have to spend less or earn more or both.

A tight budget will free up money, getting a part-time job will create more money. Most important is that you need a strong desire to get out of debt.

There are two types of snowballs, the lowest balance to largest or highest interest to lowest. Sometimes something in between will work, but make a list, pay the minimums on all and attack your list from top to bottom, with all extra funds, one at a time.

I highly suggest that you find Dave Ramsey's The Total Money Makeover and read it. It will layout a plan where you can get out of debt then build wealth.

These ads sure sound tempting. My favorite: "You have the right to pay off debt at a fraction of what you owe".

I am 90% sure this is too good to be true. I do know there are companies that will negotiate your debt downwards. But they basically will tell the issuer that you are about to go bankrupt, so they better settle for 50% on the dollar now, which will be better than they'd probably get out of bankruptcy. I'm pretty sure this will damage your credit record. Hopefully an expert on this board can chime in.

The other common strategy is debt consolidation. You take out another loan at a lower rate than your credit card rates, and pay off the credit cards with the new loan. You mention you have good credit, so this should be a viable option.

I think maat55 has solid advice. Buy the Ramsey book and figure out the power of snowballing payments, plus budgeting and money-saving tips. The bottom line is that getting out of debt is hard. You need commitment. You must commit to paying MORE than your combined minimums.

Good luck!

The only way you can get your balances lowered is to not have paid on them for many months. This would destroy your credit. Sacrifice and determination to pay your debt is needed to grow your financial health.

Ahhh, that's how they do it. A simple threat of a future default is not enough. You have to demonstrate serious intentions by missing payments. I agree, this will destroy your credit. Thanks for your reply, maat55!

It is unfortunate that so many debt relief firms are so aggressively seeking "customers". I'm sure many of these provide a great service, but you should be very wary and investigate thoroughly before signing up with any of them. Personally, a significant up-front fee would be a warning flag for me. You can check ConsumerAffairs.com: Knowledge is Power! Consumer news, reviews, complaints, resources, safety recalls for complaints about some of these companies. I'll post back if I find an authoritative list.

Great post, Thank you but my wifes hours were just cut almost in half and there is no way we are going to be able to keep up the payments on these cards. I am so pissed about this, (not at my wife) I have college tuition staring at me in the face in 4 years for my oldest. We have been so perticular about paying for so long I dont know what to do, Im half tempted to pull money out of my 401k to just get rid of these cards and then max out my 401k percentage, I know thats dumb but what else can i do if i cant make the payments ????

Your personal situation is more important than college tuition for your child.

When you loose income and are not able to keep up with your bills, you need to list your expenses and debts in order of necessity, such as: food, utilities, rent, auto expenses etc. Then, you can use remaining funds for debts.

If you are unsure of your future income, you should cut all nonessential expenses, including: cells ,cable, dingdongs, eating out etc.

Cashing in your 401k should be a last resort, it will cost you around 40%. If you need 10k, you will have to cash out about 16,500 to cover penalties and taxes. You might be able to borrow from your 401k, but if so, I would do everything possible to get it paid back as quickly as possible.

Cut nonessential expenses, find part-time jobs, and prioritize your spending.

I saw Dave Ramsey on TV this morning. He noted that the debt reduction/negotiation companies do what you could do yourself, and charge you $2,000-$6,000. He confirmed what maat55 said... you have to be very delinquent before the issuer will lower the principle, thus destroying your credit.

He also addressed a question from a person severely in debt... $156,000 in CC debt, and the wife just lost her job. The message was don't panic, take care of essentials first, then address debts with what's left. The wife might get a better job within a couple months. Try and make it through, see what develops, and only if things get even worse should bankruptcy be an option.

Keep in mind that debt settlement is not a scam. I would steer clear of any debt settlement company that charges up front fees however most of these companies are legitimate operations.

Does it hurt your credit? Yes. It is also important to keep in mind that it is much better alternative on your credit than bankruptcy or Consoliation...and MUCH less expensive.

It works like this: you setup a payment plan - of which you feel comfortable - with the debt settlement firm. They place your payments in escrow with fed insured bank. If you drop out of the program, 100% of the funds in the account will be refunded. Once you are enrolled in the program the debt settlement company (DSC) will contact your creditors and explain the situation. The DSC will now act as a liason between you and the creditors. This comes as a relief to many who are currently in collection and receiving nasty collection calls. They will then negotiate on your behalf and typically get the debt settled for 40 cents on the dollar, and sometimes less. Typical repayment terms for all unsecured debt is around 1 - 3 years.

If you have any questions regarding debt settlement, the company 'Mitigation America' does a really good job.

strzegowski, I had a couple quesitons for you:

So it sounds like the consumer's payments accumulate in the escrow account for a time, rather than going to the issuers right away. What happens to the late fees from the issuers? I assume the company tries to negotiated this away?

In the end, after all debt is paid off, what is the state of the credit record? Do future creditors see that past accounts were paid with a negotiated settlement?

Thanks.

Debt Settlement is no scam. I have personally helped thousands of clients reduce their debt and structured a program to elimidate their debt in 2-3 years. My typical client has $40k in debt; has never been late; the cards are maxxed out; he is making the minimum payment. What are the options: 1)debt settlement or 2)bankruptcy...that is it. This is not science, it's cold hard facts. Take what you make and compare it to your expenses.

Hi everyone!
Steve, What about if you negotiate with the CC company to reduce your interes? I consider it a solution to. They don't reduce your principal but at least they can put you in a low interest rate fix plan for 4 or 5 years and you get rid of debs after that!
I am not very clear how much will affect my credit if I negotiate with the CC company to reduce my interes and they put me in a Payment Plan. I am sure my Credit Report is going to show up "Account Closed by Creditor" but I don't know if the impact in my credit is going to be the same as a Debt Settlement Program. Please somebody can clarify the difference in the level of bad impact between both programs and for how long is going to show up in the Credit Report?
Thanks for the Forum guys!

Roman,
You need to decide if you want to reduce and eliminate your debt in a timely fashion or pay back the entire amount with a minimal reduction of interest rate.

If you enlist the aid of a CCCS co, any bank will view it as a bankruptcy.

I personally used a great settlement company. But i would like to ad yes it does hurt your credit while you are in the program, but when its over, your credit will go back in about a year that is how it happened in my situation. you will stop payment on your cards and the settlement company negotiates and goes to work while your money is being banked somewere. If you cant continue paying these debts you will need to do something. settlement is better than bankruptcy in the long term. You can do this on your own but i prefered not to. For many reasons one, was i dont try to fix my own toliet i call a plummer. i dont know about this stuff and I didnt know the laws and alot of times i found out later i was being harrassed illigally.
In my situation this was what worked best for me if you have any questions just ask. You can be sure i will be open and honest about debt settlement

oh, i dont have any issues with getting loans or credit cards now, i have been out of the program for 2 years and the bank has given me money.