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.

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).

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%.

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.

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.

Take the cards out of your wallet. A debit card is accepted just about everywhere that credit cards are, and you'll be spending money you have - always a good thing.

You really don't need to hire a debt settlement company to negotiate with your creditors.