Even in the days of the tightest credit in 2008, HELOCs [ home equity line of credit ] and home equity loans were being made.

Most people don't know this, but if you settle a debt for less than the amount you owed, you are potentially responsible for taxes on the forgiven debt. Look at it this way: You received goods and services for the full amount of debt, but you're only paying for a portion of it - sometimes less than 50%. Anything more than $600 is generally considered taxable, but the IRS will sometimes waive the tax if you can prove that your assets were less than your liabilities when the debt was settled.

If you'd asked me a few years ago about debt settlement companies, I probably would have told you to avoid them.

You need a clear, legitimate excuse for why you're behind [the bankruptcy], such as a layoff, divorce, or medical emergency. Be prepared to back up the circumstances with supporting documents. Anything you have to substantiate your story - including proof that you have, for instance, been actively looking for a new job - will help.

Turn down offers for new cards or credit line increases on your current cards. Credit's tight, and chances are, you're not getting many offers anyway. But if you do, remember that the less credit you have available, the less trouble you can get into.

One thing I want to make clear: You never want to hide from your debts. It doesn't work.

You must be sure - and I mean absolutely positive - that you have the willpower to pay off those credit cards and not use them again.