If you are reading this chances are you’re feeling overwhelmed by your debt and you are looking for a solution.  You are probably feeling stressed out with calls from bill collectors. You are worried you are going to be sued, have vehicle repossessed or lose your home.  You are doing the right thing by looking for a solution. The sooner you take action the sooner you can get this monkey off your back and move forward with your life.  Currently their are millions of people in the same situation as yourself. For the calender year 2010 well over 1,000,000 Americans will file for bankruptcy, and I guarantee that if you spoke to them almost everyone of them will tell you that they wish they had done it sooner.   But, for some people bankruptcy may not be the best solution.  Some solutions to consider other than bankruptcy are as follows:

Talk with your credit card company, even if you have been turned down before. Rather than pay a company to talk to your creditor on your behalf, remember that you can do it yourself for free. You can find the telephone number on your card or your statement. Be persistent. Keep good records of your debts, so that when you do reach the credit card company, you can explain your situation. Your goal is to work out a modified payment plan that reduces your payments to a level you can manage. If you don’t pay on your debt for 180 days, your creditor will write your debt off as a loss; your credit score will take a big hit, and you still will owe the debt. Creditors often are willing to negotiate with you even after they write your debt off as a loss.

Contact a credit counselor. Reputable credit counseling organizations advise people on how to manage money, bills and debts; help them develop budgets; and usually offer free information and workshops. They should discuss your entire financial situation with you, and help you develop a personalized plan to get you out of debt. A new law requires credit card issuers to include a toll-free number on their statements that directs cardholders to information about finding nonprofit counseling organizations.  Most credit counselors offer services through local offices, the Internet, or by telephone. Look for an organization that offers in-person, face-to-face counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. The federal government maintains a list of government-approved organizations, by state, at www.usdoj.gov/ust, the website of the U.S. Trustee Program. That’s the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees. If a credit counseling organization says it’s government-approved, check the U.S. Trustee’s list of approved organizations to be sure.

Debt Settlement- Essentially, debt settlement is the process of negotiating with creditors to reduce overall debts in exchange for a lump sum payment.  A successful settlement occurs when the creditor agrees to forgive a percentage of total account balance. Only unsecured debts not secured by real assets like homes or autos can be settled. Unsecured debts include medical bills and credit card debts – not student loans, auto financing or mortgages. Debt settlement can be negotiate by yourself, but in order to do so you will need a large chunk of cash so as to pay off your debt with a lump sum.  There are debt settlement companies advertising all over the internet and on the radio. These companies will negotiate your debt for a fee of approximately 15% of your unsettled debt.  For this to work you will enter into a plan with the debt settlement company that will last approximately 3 to 4 years. Over this period of  time you will make monthly payments to the debt settlement company and as they accumulate your fees they will attempt to negotiate your debt.  It is important to keep in mind that for this strategy to work you generally need to stop making payments on your credit cards.  This will negatively affect your credit score. Additionally, some credit card companies will not negotiate and will chose to sue you.  Beginning October 27, 2010 the FTC is banning all debt settlement companies from accepting up front fees for their services because of rampant fraud in this industry.

When determining what is the best solution for yourself somethings to consider are: how much debt do you owe? What ability to you have to pay? Have the statute of limitations run on your debt (so much time has passed that you can no longer be sued on your debt), What kind of debt do you have? Are you currently being sued by your creditors? Are your wages about to be garnished? Is your home about to be foreclosed on?

If your creditors will not work with you or you realistically do not have the cash to negotiate a resolution of your debts in the near future, then bankruptcy is your best solution. If you are confused what to do, then it is best to obtain a consultation with attorney. Whatever you do, do not liquidate your retirement to pay your debts.