A reader's been diligently paying off her bills, but she just can’t catch up. Here are her options.

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Is debt settlement a good idea for me? I’m in the process of paying off my debt using the snowball, but I’m not sure which debts I should focus on – or exactly what I should do. I just want my life back.

I was out of work for about six months, so a bunch of my cards fell behind. Should I contact the creditor and request a settlement? I’m just overwhelmed with all of this, and it feels like I’m never going to catch up. I just want to pay what I owe and have it updated or removed from my credit report. Please advise.

—Lakisha W. in Columbia, SC

Howard Dvorkin, CPA answers…

Unfortunately, I can’t give you a definitive answer. I can only point you in the right direction. The good news is: You will get your life back. Your situation is far from hopeless. In fact, you have options.

Let’s start with the good news: “I was out of work for about six months, so a bunch of my cards fell behind.” How can that possibly be a positive development? Simple. You were out of work, and apparently, you’re working again. I’m going to assume you were doing fine before your layoff. That means you got good budgeting bones. That’s an important factor in finding you the right debt solution.

The other good sign: You know what the debt snowball method is, and you’re using it. You haven’t been helpless in the face of a crisis. Sadly, I’ve seen many people, who are otherwise smart and hardworking, become paralyzed when financial problems arise. They ignore the problem until only the most extreme debt solutions will work.

Your options are easier. Let’s review them.

Is debt settlement a good idea?

This is the option you mentioned, so let’s address that first. Debt settlement sounds wonderful: You quite literally pay less than you owe. Who wouldn’t want that? Well, like everything else that sounds simple, it’s complicated. There are also side effects.

You can learn all about the pros and cons in this easy-to-read Debt Settlement Report, but let me sum it up this way: Your creditors obviously don’t enjoy it when you want to pay less than you agreed to. So, the process is long, involved, and will crater your credit score (which, after all, is based on your ability to pay back the money you borrow).

Still, debt settlement credit card debt is a good option when most others won’t work. Like I said earlier, however, you’re not there yet. Another option is available first.

Debt management may be a better solution.

While creditors don’t like debt settlement – and indeed, some will just refuse to do it – most like debt management. What’s the difference? Debt management is actually an arrangement between your credit card company and a nonprofit credit counseling agency. Unlike debt settlement, you pay back everything you owe, so your creditors are happy. But you’re happy, too, because you get a number of valuable perks:

  1. Your total monthly payments can be greatly reduced, sometimes by up to 50 percent.
  2. Any late fees and penalties are waived.
  3. You make one monthly payment that covers all your credit cards, so you never miss one.
  4. If you have accounts that are past-due or behind, most creditors will agree to bring them current after just three payments.
  5. You work with a credit counselor who helps you with the process and the rest of your finances, so by the time you complete your debt management program, you won’t ever need it again.

Best of all, your credit score can actually go up by the end of the process.

Read More: Debt Management vs Debt Settlement: Which Is Right For You?

Other options

There are more choices on both ends of the spectrum, ranging from debt consolidation loans all the way up to bankruptcy. With so many debt-busting options, each with its own pros and cons, how do you choose the right one for you? This is thankfully the simplest thing you can do: Call a professional.

Credit counseling is where you can get an answer for free. During an in-depth conversation, you and a credit counselor review every dollar you spend. Based on that analysis, you’ll know which debt solution will work the fastest and with the fewest hassles.

Work with a certified credit counselor to find the best solution to get out of debt.

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About the Author

Howard Dvorkin, CPA

Howard Dvorkin, CPA

I’m a certified public accountant who has authored two books on getting out of debt, Credit Hell and Power Up, and I am one of the personal finance experts for Debt.com. I have focused my professional endeavors in the consumer finance, technology, media and real estate industries creating not only Debt.com, but also Financial Apps and Start Fresh Today, among others. My personal finance advice has been included in countless articles, and has appeared in the New York Times, the Washington Post, Forbes and Entrepreneur as well as virtually every national and local newspaper in the country. Everyone should have a reason for living that’s bigger than themselves, and besides my family, mine is this: Teaching Americans how to live happily within their means. To me, money is not the root of all evil. Poor money management is. Money cannot buy happiness, but going into debt always buys misery. That’s why I launched Debt.com. I’m glad you’re here.

Published by Debt.com, LLC