8 steps to take before bankruptcy
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If your account has gone to collections: Not as good for your credit rating, but far from hopeless.

At this point, the accounts have gone from being delinquent "to being seriously delinquent," says Ulzheimer. The account has probably been closed, so now they look at you as a debtor, rather than a customer.

Having a collection on your credit report is "bad," says Ulzheimer. "But it opens up some options. Collection agencies have an incentive to collect something from your account. You have leverage to offer them some sort of settlement."

Depending on your situation, shoot for a lump-sum arrangement or a low- or no-interest payment plan. Whatever deal you work out, get all the terms, including what will be reported to the credit bureaus, in writing before you start paying, says Ulzheimer. "Whatever deal they make with you is only as good as what's on paper," he says. And if the company neglects to report your arrangement to the credit bureaus, you have paperwork to correct the error.

The bad news about this arrangement: The collection will stay on your credit report for seven years. Two things you might try:

• Ask that the collections notation show that the account was settled with a zero balance (even if you settled for dimes on the dollar). The notation will stay with you, but future lenders will see that the debt was paid in full. (And that's especially important for mortgage lenders, says Ulzheimer.).
• Ask the creditor to take the notation off of your credit report. "I see this work one out of 50 times," says Ulzheimer. But "sometimes you can convince them to wipe the debt clear, clean it off the credit report, if you'll pay the full amount."

7. Get a (second or part-time) job. "There's nothing wrong with flipping burgers," says Warren. Too many times, out-of-work professionals "engage in all-or-nothing thinking," she says. But even a little money coming in can keep a bad financial situation from getting worse.

Look for hours that give you plenty of time for job hunting and just leave it off the resume. "It brings in some cash, and that can help," Warren says.

8. Try the 30-month plan. Got one or two debts that are causing you pain? Visit Bankrate's online amortization calculator and plug in your interest rate and a 30-month pay-off period. The calculator will give you the corresponding monthly payment. That's your new monthly minimum.

For instance, say you carry a combined balance on several cards of $8,000 with interest rates of 15.99 percent. If you start throwing $325 at those bills, you'll be debt free in 2.5 years.

Howard admits that it works only when the debt is "moderately worrisome." But if you've only got one or two that are a problem, it works. You can also use the calculator to find other combinations you can live with, such as slightly longer terms or better rates. (Then call the creditor and try to cut a deal.)

Says Howard, "The reason I like 30 months is that people see the progress every month."

Dana Dratch is freelance writer based in Atlanta.