When do you have a debt problem?

Getting help

Even if you realize you need help, it's probably tempting to delay seeking it -- the same way you avoid opening those bills. But Cunningham says it's a big mistake to put things off.

"Delay only exacerbates the problem," Cunningham says. "As soon as they see some warning flags go up, we suggest that they seek out a credit counselor for help."

A credit counseling session begins with a discussion of your overall financial situation, with an aim toward identifying your biggest areas of concern. Living expenses like rent, mortgage payments, utilities and food are tackled first, followed by secured debts like car loans, and then payments on credit card debt.

If you are running low on funds after covering your basic living expenses, the credit counselor may suggest creating a debt management plan. Under this scenario, your creditors agree to lower monthly payments and may temporarily waive or lower your interest payments, late fees or overlimit fees.

Last resorts

"There are only two exit ramps left on the debt highway if a debt management plan will not work, both of which are very serious financial decisions," Cunningham says. "One is debt settlement and one is bankruptcy."

Unlike the debt management plan in which consumers must pay 100 percent of what they owe, debt settlement involves creditors agreeing to take less. The best way to go about it, according to Cunningham, is to avoid the debt settlement companies offering their services for a fee and go straight to your creditors to work out a deal. "Why pay for something that you can do for yourself for free?" Cunningham says.

If personal bankruptcy seems to be your only viable recourse, a nonprofit credit counseling agency affiliated with the National Foundation for Credit Counseling can help you navigate the process.

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