When attempting to get out from under overwhelming debt, other options include credit counseling companies or debt settlement companies. If you take either of these steps, you need to educate yourself and learn exactly what each company promises. You want that information in writing before you agree to anything or send any money.
A credit counseling company will work with you to create a budget. The reason you pay them is that they are supposed to negotiate with all of your creditors to lower your interest charges and make it easier to pay off your debts. They do not reduce your principal, only the interest rate charged. You need to understand the math, and be certain your interest rate reduction actually is not eaten up by their charges. For this to work, you need to make all of your payments to the credit counseling company every month.
A more risky strategy is that of a debt settlement company. In this scenario, you stop paying all of your bills and pay the debt settlement company those funds. They create an escrow account and when it reaches a sufficiently large amount, they attempt to negotiate a single lump sum payment to your creditors. In return for this payment, the creditor must agree to write off your remaining debt and no longer attempt to collect it.
Because you will have incurred potentially months of late charges and had multiple delinquent payments, this will wreak havoc on your credit report and credit score. In addition, there is no guarantee that the creditor will accept this payment. This is very risky, and if you have any secured property, like a car, they creditor is likely to repossess it before you accumulate sufficient funds.
If you do your homework and think one of these options will work for you, you should still speak with a bankruptcy attorney before you sign any agreements. Let them look at your plan and then compare it to what a Chapter 7 or Chapter 13 could do for you. You may be surprised to find the bankruptcy maybe be more cost effective and provide a broader degree of debt relief.