Are the “debt reduction” company useful?
"From what I understand, they basically hold on to your money while you stop paying your debt.  They keep it in an account and negotiate on your behalf. The longer you go without paying, the less the debt collector is willing to take and at some point, they will settle.  So they take the money you've been putting into their ""account"" and pay it down.  Repeat the process for all your accounts. I basically did this, without using a service. I had $17,000 on one card and they bumped the interest rate to 29%, and I had lost my job. I didn't pay it for 7 months.  I just planned on filing bankruptcy.  They finally called me up and said, if you can pay $250 a month, until it's paid off, we will drop the interest to 0% and forgive all your late fees. I did that, and five years later it was paid off. Similar situation happened on my other cards.  It seems once they realize you can't pay, is when they're willing to give you a break.  It'd be nice they just never jacked up your rate to 30% though. So, forget the service, just do it yourself.  Call them up and ask, and if they don't budge, don't pay it. Of course your credit will be shot.  But I'm back in the 700s, so anything is possible over time." They don't do anything you can't do yourself and they charge you money for it. And of course the only way they manage to negotiate the debt down is by not paying it for a while in the first place, have it referred to collections and then negotiating with the collectors. At that time, your credit rating (if you care about that at all) will have suffered a lot more damaged than it is from a few late payments. I would address the issue as to why you end up paying late first - it sounds to me like you're cutting the time left to pay to the bone and this turned around and bit you in the you-know-where. In case you are able to pay but not organised enough to do it on time, find a way to remind yourself to pay the bill a few days early for peace of mind. That won't do anything about the 28% interest but those might serve as an additional motivation to pay the debt off faster. Once you're back to showing regular on-time payments on your credit record, you might want to investigate transferring the balance to a cheaper card or negotiate the interest down (or both). If you genuinely can't pay after you've taken care of the essentials (food, shelter, transportation) then you don't need a third party to stop paying the credit card bill, you can do that yourself. No. Not in the Uk anyway, they are just an extra person/company that you have to pay. They are a complete waste of money, see my answer here for more details. Many of the services are scams, and those that are not are just doing something you can do yourself - as Jack points out.
"My sister had a similar problem and went to an actual lawyer, not a  ""credit repair agency"".  The lawyers settled her debt for a lot less than she owed, and she  also got a bonus: one of the creditors called her repeatedly, even  after her lawyers had told them not to.  The lawyers ended up getting her an extra $40,000. Combined with the  debt settlement, she actually came out ahead.  Of course, her credit score went down, but it recovered in a couple of  years." Government purchases of mortgages simply transfers the debt burden from households to the sovereign. Taxes pay sovereign debt (65% of whom are homeowners anyway). No debt has been restructured -- it's now paid via taxes instead of monthly mortgage payments -- and those paying include persons who responsibly avoided housing speculation. The U.S. has a debt-to-GDP ratio just shy of the critical point of 90%. Purchasing $10 trillion in mortgage debt (about a year of GDP) would put the U.S. on an inexorable path towards insolvency and inflation. There are all sorts of other risks (loss of a risk-free asset, moral hazard, nationalization of the housing industry, etc.) but this should make the point clear that it's not a good idea. There are only three ways to reduce debt: 1) default, 2) restructure, or 3) lower the real debt burden by de-valuing currency in which the debt is denominated. With a credit card debt at 17%, you should basically not eat in order to pay the balance off.  This should be gone within the month.   That being said, I would have a hard time reducing my contributions below the 4%, but would certainly do it to the 4%.  However, I would also deliver pizzas on nights and weekends and work all available overtime.  Coincidentally the pizza place by my home is hiring delivery drivers however, they did not disclose how much they typically make.  Only that they make min wage plus tips. Make sure you stop borrowing first, then try to have this knocked out in 4 weeks or less. "good vs ""bad"" debt in the context of that post. At least in the UK this can be a good tactic to reduce the cost of credit card debt. Some things to consider" No, the more conservative approach is to use the market value of debt (at least assuming its trading at a discount). A company wouldn't necessarily have to come to an agreement with creditors, they would just default on their obligations. In which case the company may file for bankruptcy protection, which allows for a variety of scenarios to play out (both consensual and not).   As for when debt trades at a premium, we're talking about two different factors that effect bond prices. Credit risk and interest rate risk. But yes, a company does have a higher financial obligation if interest rates decline. They're stuck paying 8% in an environment where they could refinance for 6%. If they refinance, then creditors more than likely aren't going to take less than par. If they don't refinance, then they have the opportunity cost of essentially overpaying on their cost of debt. The desire to be debt free is smart; but I think the purpose of a large group is motivation and peer pressure.  Getting out of debt faster isn't going to work mathmatically.  (I can't reason a scenario where the group's collective power doesn't favor one individual in the group over another.) All of the following conditions must be met: If any single thing fails, or if anybody changes their mind about how they feel about paying another person's debt, this plan will breakdown quickly and get very ugly.  Please notice most of those items are emotions, which cannot be planned nor controlled. Bottom line:  Don't do it.  The risks are too high compared to the average reward.  If your family could pull it off, a better plan would be to sell a reality show about the magical family who never fights and always puts the good of the others before themselves. Everybody do a debt snowball individually but have an email group, weekly group call, regular family meeting, group chat session or dinner event where you encourage each other, talk about the success, failures and openly discuss everybody's situation.  This is called a support group and they can be more effective than doing it on your own. Go around the table and  This will require humility, patience and grace from the participating family.  It will rely on similar peer pressure to succeed as a single group, without all of the very real pitfalls and very real consequences of a individual failing in a big group. Of course your situation is very hurtful at a personal level, and I sympathize. I just don't get your point about being driven further into debt? It would seem that with a lower credit score you are prevented from taking on more debt. That can absolutely be hurtful especially to someone who runs a business that relies on short term credit. As for why they do this, they do it to reduce their risk - they don't want to lend more money, they are afraid that you will lose your job and default. Of course it is not as personal as I am writing it, not for you (they don't target you personally - they target your credit profile) and not for them (it is a matter of how the market views the debt and how much they can trade on such debt, not what they want to do personally). As for the TARP bailouts not releasing enough credit - this is reality. Goverment always thinks it can influence the situation more than it actually can. In order to unfreeze credit there needs to be a growing economy that makes the risk look acceptable. No amount of Goverment nudging will really change that more than marginally. By the way, legislation like this (forcing credit card companies to not raise their rates) can lead to credit restrictions. By artifically forcing the rates down the risk has to be ballanced somewhere - so it will be ballanced by lowering credit lines or by other means. Like any price control, if you restrict the price, it causes shortages. Intrest rates are the price of credit. This sounds like a crazy idea, but in reality people don't make the wisest decisions when considering bankruptcy in Australia.  My suggestion would be to get some advice from an insolvency specialist. Yes. Using debt appropriately is a huge part of what's called optimal capital structure theory in the finance world. Debt is generally cheaper than equity financing due to the tax deductibility of interest and using it appropriately can really juice the profitability of a business as long as the rate of return on equity in the business exceeds the interest rate on the debt. It won't hurt your credit rating. I wouldn't worry about it. The company can certainly pursue debt collections across borders but unless its a massive sum.. they will write it off. Now.. what the right thing to do is to take care of it... 1. for karma's sake and 2. so you don't make a bad name for foreigners. Short-term,  getting a balance transfer will help. It'll reduce the interest you pay. You can also reduce the interest you pay on your cars if you are able to consolidate your debt into a personal loan. To your question about debt consolidation companies, as far as I know, that's all they do.  However, long-term, there's only two ways to stay on top of debt: increase your income, or reduce your spending.  Basically, if you can't or won't get a raise or a job that pays more (or a second job), you need to cut back on your spending.  You might need to do something radical, like move somewhere with cheaper rent (as long as increased travel costs doesn't offset the saving). But you'll be much better off in the long run if you step back and take a look at your situation now, and make adjustments accordingly. "A simple response is that it's a good political/strategic move. Ford have effectively said, ""We know we still have debt, but we think the long term future is so good we can go back to paying dividends."" It builds investor confidence and attracts new money. It can also be seen as a way of Ford indicating that they believe the type of debt (regardless of the amount) is okay for them to carry." No. Unless you are ten Bill Gates rolled into one man, you can not possibly hope to make a dent in the 14 trillion debt. Even if you were and paid off whole debt in one payment, budget deficits would restore it to old glory in a short time. If you have some extra money, I'd advise to either choose a charity and donate to somebody who needs your help directly or if you are so inclined, support a campaign of a financially conservative politician (only if you are sure he is a financial conservative and doesn't just tell this to get elected - I have no idea how you could do it :). In finance you are taught that debt financing is cheaper than equity financing.  Also to improve your credit rating, showing that you can carry debt responsibly and pay it off without a hitch sends dog whistle that the corporation is operating well. Adding assets (equity) and liabilities (debt) never gives you anything useful. The value of a company is its assets (including equity) minus its liabilities (including debt). However this is a purely theoretical calculation. In the real world things are much more complicated, and this isn't going to give you a good idea of much a company's shares are worth in the real world