See Settling Your Credit Card Debts at ftc.gov/credit for more information. Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Attorney fees are additional and can vary. Next, list the expenses that vary — like entertainment, recreation, and clothing.

The Chapter 13 waiting period is much shorter and can be as little as two years between filings. Moreover, credit card consolidation is a convenient option to become debt free without taking serious steps like bankruptcy. If you or someone you know is in financial hot water, consider these options.

The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. Companies offer these rates as teasers -- enticements for you to switch credit card vendors. However, though some companies are reputable, many are scams and can flee with your hard earned money.

Chapter 13 allows people with a steady income to keep property, like a mortgaged house or a car, that they might otherwise lose through the bankruptcy process. An even more costly potential pitfall is the disreputable debt counselor. Many credit counseling organizations are nonprofit and work with you to solve your financial problems. This Bankrate calculator can help your determine whether borrowing against your home's equity is a wise move. Credit counseling agencies also force you to stop racking up debt. And while equity loan interest generally is tax deductible, it could be limited in some situations.

People who follow the bankruptcy rules receive a discharge — a court order that says they don't have to repay certain debts. They favor debt management because it costs less and is quicker than a debt-consolidation loan. You may have to agree not to apply for — or use — any additional credit while you're participating in the plan.

For more information visit www.uscourts.gov/bankruptcycourts/fees.html. Remember that these loans require you to put up your home as collateral. You should be cautious of claims from so-called credit repair clinics. If that person took out a 15-year home equity loan at 10 percent (because his credit wasn't good enough to get him a lower rate), Bankrate's loan calculator shows he'd end up paying $18,686 in interest on top of the twenty grand he borrowed. If your car is repossessed, you may have to pay the balance due on the loan, as well as towing and storage costs, to get it back. Credit card debt consolidation is undoubtedly beneficial for those individuals who are struggling to make payments toward several credit card bills.

And, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or security lien on it. The first step toward taking control of your financial situation is to do a realistic assessment of how much money you take in and how much money you spend. Depending on your financial condition, the amount of any savings you obtain from debt relief services can be considered income and taxable.

Credit card companies and others may report settled debt to the IRS, and the IRS considers it income, unless you are "insolvent." You are insolvent when your total debts are more than the fair market value of your total assets. Writing down all your expenses, even those that seem insignificant, is a helpful way to track your spending patterns, identify necessary expenses, and prioritize the rest. Even if you do qualify for a zero-percent or similar single-digit rate, it won't last forever. Cooperative Extension Service operate nonprofit credit counseling programs. The fee may range from $100 to several hundred dollars.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments and utility shut-offs, and debt collection activities. But before you do business with any company, check it out with your state Attorney General, local consumer protection agency, and the Better Business Bureau. You'll avoid the added costs of repossession and a negative entry on your credit report. Resist the temptation to follow up on these advance-fee loan guarantees. There are debt-consolidation loans, balance transfers to a zero-percent credit card and home equity loans or lines of credit.

You also should know that federal and some state laws prohibit these companies from charging you for their services until the services are fully performed. Your public library and bookstores have information about budgeting and money management techniques. In some instances, when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home. Secured debts usually are tied to an asset, like your car for a car loan, or your house for a mortgage.

After you have made all the payments under the plan, you receive a discharge of your debts. These programs are offered by professional debt relief agencies. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off your debts during a three-to-five-year period, rather than surrender any property. Note that personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations. Your creditors may agree to lower your interest rates or waive certain fees, but check with all your creditors to be sure they offer the concessions that a credit counseling organization describes to you. A debt collector may not call you before 8 a.m., after 9 p.m., or while you're at work if the collector knows that your employer doesn't approve of the calls.

If you live that long, you'll pay $64,805 in interest. If you're not disciplined enough to create a workable budget and stick to it, can't work out a repayment plan with your creditors, or can't keep track of mounting bills, consider contacting a credit counseling organization. Many companies appeal to consumers with poor credit histories, promising to clean up credit reports for a fee.

Most lenders are willing to work with you if they believe you're acting in good faith and the situation is temporary. If you stop making payments, lenders can repossess your car or foreclose on your house. With a credit card consolidation, you're trying to borrow your way out of debt. Businesses advertising voluntary debt reorganization plans may not explain that the plan is a bankruptcy filing, tell you everything that's involved, or help you through what can be a long and complex process.

Each must be filed in federal bankruptcy court. Credit card debt consolidation is a legal consumer debt elimination program that allows you to combine all your bills into one affordable monthly payment. There is no guarantee that the services debt settlement companies offer are legitimate.

In a DMP, you deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. They may claim that using their services will have little or no negative impact on your ability to get credit in the future, or that any negative information can be removed from your credit report when you complete their debt negotiation program. For instance, often some companies just deal with unsecured loans and don't trade with secured debts such as mortgages or auto loans.

It is true that many legitimate creditors offer extensions of credit through telemarketing and require an application or appraisal fee in advance. If you are not careful enough, then credit cards can take you toward debt once again. Some firms offer shoddy service at sky-high fees.

In exchange for consolidating your debt and working with your creditors to reduce your payments, credit counselors require you to give up your credit cards. However, bankruptcy information (both the date of your filing and the later date of discharge) stay on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes get a job. As this Bankrate story points out, some credit counseling and debt-consolidation companies are only interested in making a quick buck on debt-ridden consumers.

Under the federal Telemarketing Sales Rule, a seller or telemarketer who guarantees or represents a high likelihood of your getting a loan or some other extension of credit may not ask for or accept payment until you've received the loan. Credit cards have pushed you toward debt. You should sign up for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money. Turning to a business that offers help in solving debt problems may seem like a reasonable solution when your bills become unmanageable.

There are two primary types of personal bankruptcy. People that have taken on too much debt tend to go into denial; they'd rather not know how much debt they owe. The firm may promise to hold your funds in a special account and pay your creditors on your behalf.

Therefore, closely investigate a certain credit card debt consolidation company before you agree to anything. You might be wondering how to consolidate credit card debt. Watch a video, How to File a Complaint, at ftc.gov/video to learn more. Debt settlement firms may claim they'll negotiate with your creditors to reduce the amount you owe. While creditors have no obligation to agree to negotiate the amount a consumer owes, they have a legal obligation to provide accurate information to the credit reporting agencies, including your failure to make monthly payments.

If you do business with a debt settlement company, you may be required to put money in a dedicated bank account, which will be administered by an independent third party. Unsecured debts are not tied to any asset, and include most credit card debt, bills for medical care, signature loans, and debts for other types of services. Don't wait until your accounts have been turned over to a debt collector. There also is no guarantee that a creditor will accept partial payment of a legitimate debt.

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If you get help of a credit card consolidation program, youll no longer have to pay several monthly payments.

So before arriving at any decision ask them. Find out what services a business provides and what it costs, and dont rely on verbal promises. Home equity lines or loans often are touted as a quick and easy way to get out of debt. Viales statistics underscore a major problem with debt consolidation. At that point, your creditors have given up on you. And thats presuming you dont charge another thing during that time.

Personal bankruptcy generally is considered the debt management option of last resort because the results are long-lasting and far reaching.

Did the credit card computations scare you into looking for another option. To find a reputable firm, verify certifications or third-party registrations. Finally, the Internal Revenue Service may consider any amount of forgiven debt to be taxable income. Some agencies limit their counseling services to homeowners with FHA mortgages, but many offer free help to any homeowner whos having trouble making mortgage payments.

Check with the Association of Independent Consumer Credit Counseling Agencies or the National Foundation of Credit Counseling to see if the service youre considering is a member of either group.

By leveraging your residences value, the pitch goes, you can get money to pay off other bills and a tax break, too. The contents of this web site are not intended to establish an attorney-client relationship, provide the reader with legal advice, or substitute for legal advice from an attorney. Some businesses that offer to help you with your debt problems may charge high fees and fail to follow through on the services they sell. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Are your accounts being turned over to debt collectors.

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Before you sign on the dotted line, be sure that the costs of the new, bundled loan will truly be less than what youre already paying various creditors. Much of the time, card companies target consumers with better credit, so that may leave someone struggling with debt without this option. Ask the credit counselor to estimate how long it will take for you to complete the plan. This fighting-fire-with-fire approach can take several forms.

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Start by listing your income from all sources. For many consolidation-loan candidates, their current credit woes mean they wont get the lowest-available interest rate. This debt elimination process is suitable for those people who are struggling to manage several credit card debts. If youre thinking about getting help to stabilize your financial situation, do some homework first.

Some lenders may reduce or suspend your payments for a short time. In this case, its your money thats burning.

Both also provide exemptions that allow people to keep certain assets, although exemption amounts vary by state. Even though your creditor agreed to the reduced payment, you technically did not pay your account as called for in your original credit agreement. A successful DMP requires you to make regular, timely payments, and could take 48 months or more to complete.