• You are paying for monthly essentials like food, gas and household necessities with credit which you are unable to pay off at the end of each month.

• Your credit card balances continue to rise even as your monthly income is declining.

• You charge an amount each month that far exceeds what you are able to pay off.

• You make only the minimum payment (if that) required on each account.

• You are at (or near) the maximum limit on your accounts.

• You juggle paying off one credit card by using another.

• You must resort to depleting your savings and retirement accounts to pay what you owe to keep your head above water.

• You have succumbed to using payday-type lenders (high risk, high rate) to pay and service your debt load.

• You find yourself either covering up or lying to others about your debt.

Utilize your home equity. Assuming that you still have a reasonable amount of equity in your home, you can borrow the difference between its appraised value and the outstanding balances of all loans (also referred to as liens) you currently have against your home.  The added benefit of this option is that the rate of interest should be lower than that on consumer loans because the loan is secured against a real asset (your home) and you may also receive the substantial benefit of being able to deduct the interest paid on the loan, a benefit which your consumer loans lack.

Liquidate some investments you have, excluding your retirement funds and accounts.  If you have stocks, mutual funds or bonds which could be sold to help pay down high interest consumer loans, you may want to consider it.  You also need to pay close attention to any tax consequences selling these investments pay produce.  The benefit of selling off the asset must out weigh the cost.  That is to say any tax consequences associated with liquidating the asset should not exceed that of the total interest cost paid on your consumer loans.

Borrow against the cash value of your life insurance policy to pay down your consumer debts.  You may want to eliminate the cash value policy completely and just withdraw the cash balance available to you. 

Take out a loan against your 401(K) or other employee retirement account.  First verify with your company whether you are allowed to do so, however most companies will permit it today and at a reasonable rate of interest and terms because you are essentially borrowing from yourself.   Note however that it is a risky loan to pursue if you do not (or are unable) to repay the loan because you may face paying both taxes and penalties on any un-repaid funds.

Last resort: borrow from family or friends.  Note you want to make certain that the person(s) whom you choose to ask for the loan are actually in a position to extend it.  If you have parents who are at or near retirement age you might want to think carefully about asking them for a loan as they will likely jeopardize their own financial future to help you (putting children first as parents typically do). This is something of course you would not really want them to do.

Negotiate with Creditors

Many creditors will be happy to negotiate with you directly to help you achieve an affordable payment so that you can ultimately repay the loan and they do not have to involve a collection agency or find the need to write off your loan as uncollectible.

Debt Consolidation

There so many disreputable companies that will be standing in line like vultures to take advantage of you, so choose who you associate with very carefully.  If you can work with a non-profit organization such as Consumer Credit Counseling you'll take comfort in knowing that it's actually your best interests which will be the primary consideration and not a for-profit lender's bottom line.

Debt Payoff

This is a difficult path to take but also the one providing the most satisfaction once the debt is finally paid in full.  To achieve debt repayment, you will need both a plan and a budget.  In the long run it will be best if you can pay off the debt with the highest interest rate first but you may feel more of a sense of accomplishment if you kill off the debts with the lowest balances first, inspiring you to continue along with the plan.  Another significant advantage of paying off your debt this way is the positive impact it will have on your credit score.

Bankruptcy

With the changes to the bankruptcy laws in October of 2005 this option is not as easy and may not be the solution for eliminating debt it was once thought to be.  Under the old “pre-October 2005” bankruptcy laws, Chapter 7 bankruptcy was what was referred to as the so called “fresh-start” option.  However under the new law fewer people are permitted to file Chapter 7 and are forced to file Chapter 13 by the courts.  You are not allowed under the new rules to file Chapter 7 if your income is above your resident state's median level and you can afford to pay 25% of your unsecured debt.  You are also required to meet with a credit counselor in the six month period prior to applying for bankruptcy and you must also attend money management classes at your own expense.  Under Chapter 13 bankruptcy you will be given a repayment plan for a period up to five years and then any debts not included in the repayment plan may remain unpaid.

A non-profit organization which helps consumers overcome their over spending habits and get on the right course.  You can also take solace in the fact that you are not alone and that others share your problem.  They have chapters located across the country.  Go to: http://debtorsanonymous.org/about/about.htm  or contact by mail: Debtors Anonymous General Service Office PO Box 920888 Needham, MA 02492-0009 or by telephone: 781-453-2743 781-453-2745 (FAX).

A non-profit organization which has a large network of debt-counseling offices providing free or low cost assistance to financially overextended consumers.  They want to help you take control of your finances and avoid bankruptcy.  Go to: http://www.nfcc.org/AboutUs/aboutus_01.html   or contact by mail: National Foundation for Credit Counseling 801 Roeder Road, Ste. 900, Silver Spring, MD 20910 or by telephone 301-589-5600.

Allso a non-profit group, they are the nation's top advocate on behalf of lower income consumers.  They will assist in financial and legal matters and will help you find a lawyer in your area.  Go to: http://www.consumerlaw.org/about/   or contact by mail: 77 Summer Street, 10th Floor, Boston, MA 02110-1006 or by telephone: 617/542-8010; Fax 617/542-8028.

A non-profit association of attorney's and consumer advocates whose goal it is to protect consumers from unfair and abusive business practices.  Go to: http://www.naca.net/about.htm  or by mail: NACA National Association of Consumer Advocates 1730 Rhode Island NW, Ste 710 Washington, DC 20036 or by telephone: (202) 452-1989 voice (202) 452-0099 fax.