My hat goes off to you for just acknowledging that you’ve got to do something about your debts. Obviously, it’s a bad situation to be in, so here are your alternatives for getting out of it. If you don’t do anything though, then you’re likely to get sued if you default on a credit card. And that will damage your credit and in Pennsylvania that could subject you to having a bank account garnished.

First, you can consider Consumer Credit Counseling Services (“CCCS”), which is a non-profit debt consolidation service. They will review your income and expenses and suggest ways to reduce expenses and repay debts. In Pittsburgh, the CCCS agency to contact is Advantage Credit Counseling Services, located on Pittsburgh’s South Side; you can call them at (888) 511-2227. They may be able to reduce the interest rates on some of your credit cards and propose a consolidated payment plan to them. Unfortunately, CCCS is unlikely to assist you with repossessions and tax debts, so you’ll have to address those separately.

Be careful about using debt consolidation companies other than CCCS. Some are not licensed and many have had consumer problems.

Second, you can consider a ”debt settlement” company. Be careful; these are controversial and rarely succeed. Here’s how they work: you will pay the debt settlement company a monthly amount. The debt settlement company will advise you to stop paying your credit card companies. Under the terms of their agreement, they will not protect you in the event that your creditors sue you. Moreover, your creditors will continue to harass you for payments. When the debt settlement company has amassed a sizable amount of money in your account, they will begin to “settle” your debts. For example, they will attempt to pay anywhere from 30 per cent to 70 per cent of the overall balances to your creditors by paying lump sum amounts to the individual creditors.

My question is this: why do you need to pay a debt settlement company to negotiate a lump sum payment for you when you can do it for yourself?

Finally, you may be tempted to borrow from your 401(k) plan to pay off credit card debt. There are three problems with this approach. First, your retirement funds are for your retirement. How are you going to replace those retirement funds? Second, 401(k)s and IRAs are generally protected from your creditors anyway. So if you simply filed bankruptcy, then you could protect those retirement accounts in the first place. Third, you may simply be creating new debt with the IRS due to the penalties and taxes that you will be incurring.