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.

You also need to understand that when you consolidate credit card debt into mortgage debt - like a home equity loan or a HELOC [ home equity line of credit ] - you're taking an unsecured debt and turning it into a secured debt.

A consolidation makes sense only if you can lower your overall interest rate. Many people consolidate by taking out a home equity line loan or home equity line of credit (HELOC), refinancing a mortgage, or taking out a personal loan. They then use this cheaper debt to pay off more expensive debt, most frequently credit card loans, but also auto loans, private student loans, or other debt.

If you're filing bankruptcy, you will likely want to hire an attorney. But for debt settlement, a company is sufficient, or as I said, you can often do the legwork on your own.

If you have even a smidgen of doubt that you'll be able to stay away from racking up additional debt, don't do it.

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

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.