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Dear To Her Credit,



I have $52,000 in credit card debt. I was enrolled in a debt-solving company plan for a year, during which time I paid $657.50 per month and settled two accounts.

With the economic downturn, however, we’ve been unable to make our full payments. My husband had his hours cut back at his job, and I lost a lot of clients due to the economy (I’m self-employed). I called my debt-solving company to ask if I could reduce the monthly payment for a short time and they said “No.” So here I am — I have already paid them $4,500 and I am back to square one.

Now I am considering bankruptcy on this unsecured debt because I have exhausted every possibility. It’s wrong that a consumer should have to pay a company to work with the credit card companies on settling your debt at a reasonable rate because they will not communicate with you. They only will harass you until you’re dead and after. So I feel my only option is to file bankruptcy and start fresh. The credit card industry had better look out because President Obama is coming after you. They are nothing less than organized crime. — Pamela Jean

Dear Pamela Jean,

You are in a tough spot right now. It’s bad enough when a recession hits one of your jobs, but both of yours have been affected. I’m going to be honest with you, however. You and your husband put yourselves in a position where any dip like this in the economic road could throw you off kilter.

It’s easy when times are good — especially if they’ve been good for a long time — to spend money like the good times will last forever. We look at what we make now, or what we’ve been making for the last year or so, and decide how much we can spend. The budget expands to fit what’s coming in. If we have available credit, the budget can easily expand to use that up, too.

There always have been and always will be economic bumps in the road, unfortunately. Not planning for them can be disastrous. Your $657 monthly payment on credit card debt didn’t seem bad when you and your husband were both working full time. Now, it’s a hard burden to bear.

Before you get mad at the banks, think about who got you into this predicament. It wasn’t the credit card companies. All they did was lend you money that you promised to repay (although communicating with banks can be frustrating — no doubt there). The debt reduction company did what it said it would do; it negotiated lower balances and consolidated your debts. In return, you agreed to pay a fee and make monthly payments. Perhaps there is more to the story, but it seems you are taking your frustrations out on companies that only want to you fulfill your ends of the bargains you made.

To see it from their point of view, imagine you loan $20 to your brother-in-law today. Next week, he says he wants to negotiate what he owes you. He offers you $10, or even $5. What would you say? I’d think he’d better have a pretty good reason! That’s the scenario credit card companies are facing every day with thousands of customers. They are under no legal obligation to automatically reduce people’s balances without good cause.

I don’t believe $52,000 is worth going bankrupt over. That’s only $26,000 apiece for you and your husband — not impossible amounts for two people in their working years. Bankruptcy costs money — a lot more than the ads promise. If bankruptcy costs you $5,000 by the time you pay a lawyer and trustee fees, that’s money that could have gone to reducing your debt instead. And if you thought debt negotiation was a letdown, wait until you try bankruptcy! Most people who file for bankruptcy later regret it.

Debt negotiation didn’t fix the problem. Bankruptcy won’t fix it easily or without consequences. Even President Obama cannot make your debt go away. Only you have the power to take control of your finances from this day forward. But you need help to do that.

An outside person who has helped people through troubles just like yours (or worse) can help you see all your options and then help you formulate a plan. Be sure to find a reputable, nonprofit credit counselor.

It’s never hopeless. Please see a financial counselor as soon as possible. Make an appointment this week.

See related: 8 steps to picking a credit counselor, How debt settlement works, how it affects credit scores, Take control of debt, avoid bankruptcy