The debt settlement company will direct you to stop paying your creditor and instead send the money directly to them each month. The company's goal is to demonstrate to your creditor that you don't have the money to pay up - that's your leverage. After a few months, the company will typically go to the creditor and say, "I'm holding X dollars on behalf of your customer. He doesn't have the money to pay you, so you should take this amount as a settlement or you'll end up with nothing." If the creditor wants to get paid badly enough, it will take the money.

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 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.

Rolling all of your debts into a single loan is a good idea - in theory. In fact, it can be a great idea.

If you'd asked me a few years ago about debt settlement companies, I probably would have told you to avoid them.

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.

If you are able to settle, you'll be getting off rather easy. Debt settlement companies can sometimes get you off the hook for a large percentage of your debt - in many cases, up to 50% will be written off.