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.

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.

You won't be caught off guard and you won't feel guilty, because you'll be spending money that you've allocated for the occasion.

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.

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%.

Get your friends involved. Let your shopping buddies know that you're on a tight budget, and they can help you out when your willpower starts to weaken at the mall.

In most cases, if you've gotten to this point, you've already received a letter or phone message from your creditor with the name and extension of a representative. If you haven't, you can call the toll-free number on your bill, but keep in mind that the person who answers may not have the power to negotiate a settlement. Ask to speak to someone who is either a supervisor or in the settlement department, if the creditor has one (as many do).