Your Options

Debt Settlement

Debt Settlement works by reducing the balance owed (principal) on your unsecured personal debt accounts through the time-honored process of creditor negotiation. This is different from simply reducing the interest rate as with Debt Consolidation and Credit Counseling, which do not affect the total debt balance. By reducing the balance itself, Debt Settlement provides a much faster means of becoming debt-free. Most creditors are willing to accept 50%, 40%, sometimes as low as 20% of the balance owed in order to close out an account rather than lose the entire amount in a bankruptcy proceeding. From a business perspective, it is a matter of the creditor receiving something rather than nothing, as would be the case in most bankruptcies. Of course, different creditors have different policies, but as a rule, discounts of 50% or greater are routine in the industry. As a consequence of this approach, money that was previously wasted on endless minimum payments (most of which went toward interest charges) goes toward reducing the actual debt balance. That's why Debt Settlement through negotiation is the fastest debt elimination method short of Chapter 7 bankruptcy.

Debt Consolidation Loans

Debt Consolidation loans do not reduce the amount you owe, it simply combines all of your debt and attaches a lower interest rate. All you are doing is exchanging one debt for another at a lower interest rate.
When applying for a debt consolidation loan you typically will be asked to secure the loan against some form of asset (collateral), usually a house or car. This transfers your unsecured debt to a secured loan, which puts your personal possessions at risk if you fail to make payments. These loans also extend the period of time it will take to get out of debt. A home equity loan can be spread out over 30 years!
Statistics show that 80% of people who apply for a debt consolidation loan find themselves digging into deeper debt. The majority of people who enter a debt consolidation loan program neglect to cancel their credit cards after they have been paid off so they tend to use them again and get right back into debt problems. 65% of people who use debt consolidation loans will go over their credit card limits again which means that not only do they have to pay back the consolidation loan they have new credit card debts to worry about! Unfortunately those people have just doubled their debts.

Credit Counseling

Although they claim non-profit status, Credit counseling programs similarly work like a collection agency. Credit Counselors work on behalf of the creditors who pay them 12-15% of the amount they collect for the creditors. They can also charge a monthly fee from $15-$40.
Credit counselors work with prearranged figures with creditors to reduce your interest rate and minimum payments. The average minimum reduction is 8%. Some creditors will not go below a 20% interest rate and other creditors refuse to participate in these programs. All of your credit cards will be cancelled and you will need to pay 100% of the full debt amount, including interest! These programs are typically time consuming (4-7 years to payoff creditors) and statistics show that 79 out of 100 people that enroll in these programs drop out.

Bankruptcy

Did you know that over 1 million US citizens file bankruptcy every year? Enormous individual debt and pressure from the collection agencies to collect this debt, forces more and more people to file bankruptcy.
If you cave into this pressure and file bankruptcy nobody wins. The bill collectors receive no money and your credit is scarred for 10 years. Your bankruptcy discharge can also appear in public court records for up to 20 years!
In addition bankruptcy can affect you when trying to purchase a home or auto, finding employment, obtaining insurance or getting security clearance. Moreover, depending on the type of bankruptcy you file the courts may force you to pay your creditors anyway! You should only consider bankruptcy as your last option!

Do Nothing

This apparently is the most common choice for many consumers, but the least effective choice. Unfortunately, most consumers who chose this option are just avoiding the inevitable: Your debts eventually have to be taken care of! Choosing to do nothing does not solve your debt problems.
If you continue with this choice, harassing phone calls and letters from creditors and collection agencies as well as late and over limit fees will overwhelm you. This can eventually lead to lawsuits, liens, judgments and garnished wages. This option is not a reasonable choice!