Credit Counselor

• Credit counseling can be a useful and helpful tool when trying to negotiate with creditors and manage insurmountable credit card debt. However, it is essential to choose a credit counselor wisely, as some unscrupulous companies make promises they can't keep and/or charge unreasonable fees for services you could do on your own.
  
  When choosing a credit counselor, look for a not-for-profit (a 503(c)(3) certified) credit counseling service if possible. Ensure that the agency is accredited by a national accrediting body, such as the National Foundation for Credit Counseling and/or a third-party accrediting agency such as the Council on Accreditation. Ensure that your specific counselor is a Certified Consumer Credit Counselor.
  
  Understand all of the fees and services provided--will they work with all of your creditors, do they offer or require classes or budgeting help, what do they do with your payments, and how long does counseling last. Get a complete listing of all fees charged--counselors should not be paid separate fees for writing debt management plans, and the full amount of your payments should usually go to creditors.
  
  Be wary of unreasonable promises that seem too good to be true, like promises that they will remove adverse information from your credit report.
  
  

Do-It-Yourself Debt Negotiation

• It is possible to negotiate with your creditors without going through a credit counseling agency. Your first step should usually be to contact your lender and see if you can negotiate either a lower interest rate, or a payment plan, or both. If your lender is unwilling to work with you and/or if you have so much debt that you are in danger of bankruptcy or otherwise think that paying it back will be insurmountable, then your next step may be to simply stop paying your credit card bills. When the account goes into default, most creditors will want to negotiate to avoid having to sell the debt to a collection agency for pennies on the dollar. Save the money from not paying and offer a one-time cash settlement to creditors, or offer a payment plan for less than what is owed. Be aware that this will have an adverse impact on your credit score, and that creditors and collectors will likely begin to call you regularly.
  
  Negotiate in writing, ensuring that your offer and any counter offers are sent in letter form by registered mail. Do not send money until you get the full terms of the settlement in writing, including the amount you will pay, the method of payment, a listing of the debts being settled, and a statement that the company is accepting the settlement as payment in full.
  
  Be aware that settling a debt for less than what is owed, either by yourself or with the help of a credit counselor, has an adverse effect on your credit score and can have tax implications, as you may be taxed on the forgiven portion of the debt as income.
  
  

Bankruptcy

• A final option for insurmountable credit debt is bankruptcy. This should be a last resort, as it can have a detrimental effect on your credit score and it will remain on your credit report for up to 10 years. Depending on the type of bankruptcy you are eligible to file, your debts may either be forgiven or you may be ordered to pay on a set payment plan determined by a bankruptcy judge.
  
  Bankruptcy should never be attempted on a do-it-yourself basis, and you should always work with a licensed bankruptcy attorney. Make sure you understand what type of bankruptcy you are eligible for upfront, how much of your debt will be forgiven, what assets you will be allowed to keep, and what your attorney charges for the bankruptcy.