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

After explaining why you're in trouble, ask the creditor if the company would be willing to accept a smaller amount. Start negotiations at about 30% of the total amount due, with the end goal of paying 50%.

The Bankruptcy Reform Act of 2005 made it harder for individuals to file bankruptcy, which is always the last resort. Unfortunately, simultaneously consumers racked up so much debt that counseling companies - which are higher up on my list if you need help managing your debt - are sometimes unable to help. So if you fall into this camp, debt settlement may be something to consider.

The interest rate you receive, however, is contingent on your credit score.

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.

Unless you have multiple accounts that you need to negotiate and you think the project is just too big to tackle on your own, you're better off just calling your creditors directly.

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.