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.

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.

No company can promise an end date, but if you have multiple debts, the first one should be settled within a year.

When you default on a secured debt, the creditor takes the asset that backs up that debt. When you convert credit card debt to mortgage debt, you are securing that credit card debt with your home. That's a risky proposition.

In fact, the bigger the bill, the less likely you are to spend it. If you want to really save money, spend only cash and carry only fifty-dollar bills.

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.

If you are, consolidating at a lower interest rate can help you pay off your debt faster. But if there's even a small chance that you'll spiral back into debt, it's not for you.