By Herb Weisbaum ConsumerMan
msnbc.com contributor
updated 1/14/2009 3:47:25 PM ET 2009-01-14T20:47:25

Getting out of debt isn’t easy. When the bills keep coming and the money isn’t there bankruptcy may seem like the only option.

In many cases, there’s a better way. It takes enormous commitment, a lot of hard work and proper guidance – but it can be done.

“The key is to get help early,” says William Staler, vice president of Consumer Credit Counseling Service headquartered in Columbus, Ohio, one of the largest non-profit counseling agencies in the U.S. Their service is available in 40 states. “An average family with a debt load of $20,000, even $30,000 can typically qualify for a debt management program, and be successful, as long as they have an income.”

Staler tells me his agency counsel more than 51,000 people this year. “Most are honest, hardworking people who got into a bit of trouble and are trying to get out,” he says. The majority were living paycheck to paycheck until they were pushed over the edge by a job loss, underemployment, divorce or medical problems.

One of the happy endings
Four years ago, Rob and Liz Ney of Auburn, Wash. were drowning in debt. Unable to make ends meet on their limited income, the Neys turned to credit cards. Before they knew it they had 16 different cards and owed more than $35,000.

“We were not getting anywhere,” Rob remembers. “It was a struggle every month just to come up with enough money to make the minimum payments.”

The Neys realized they needed help, so they contacted Consumer Counseling Northwest, a non-profit agency located in Seattle. Debt counselor Teresa Seeley negotiated with their creditors and got them to lower the interest rates on all those credit cards.

Seeley went over the Ney’s income and living expenses and set up a payment plan. They would need to pay $826 toward their debt every month.

To come up with that much money, the Neys had to cut expenses. And they did. They made a budget and stuck to it. Shopping trips were planned. Impulse purchases were a thing of the past. Because their credit card accounts were now closed, they had to pay with cash.

“We were surprised a how much we could save,” Liz says.

Liz spent a lot of time looking for other ways to save. She reduced their auto insurance coverage, modified their landline and cell phone service, found a free Internet provider, and dropped back to basic cable. Just these four things cut the Ney’s monthly budget by $140.

It took four years, but in July of 2008, Rob and Liz Ney made their last payment. They were debt-free. As Rob put it, “We’re out of the tunnel!” The Neys plan to continue their frugal ways. Now they’re saving to buy a house.

Saving at-risk homes
Karen Southern of Mount Sterling, Ohio, was sure she would lose her house. She’d already missed four mortgage payments and was in foreclosure.

Southern’s financial problems started a year ago, when at the age of 45, she had a major heart attack. “I died, I was dead,” she says. Southern was revived and air-lifted to the hospital where she spent several days in critical care. Her hospital bill topped $100,000.

It would have been easy for Southern to let the inevitable happen. But she didn’t want to lose her house and she didn’t want to declare bankruptcy. So she went to Consumer Credit Counseling Service in Columbus and saw Sonya Major, a certified financial and housing counselor.

After looking at Southern’s total financial picture, Major contacted the mortgage lender and asked them to help. And they did. They lowered the rate from7.95 percent to 3.95 percent. Her monthly payments went from $722 to $486.

“This is not unusual,” says Major, who saved 81 houses from foreclosure in the last year. Clearly, some people are too far behind to help and some lenders won’t agree to new terms. But Major says it’s always worth trying to modify the loan. “You’ve got nothing to lose.”

Is it best to use a trained housing counselor instead of trying to do it yourself? “Absolutely,” she says. “You are so much better off working with someone who does this every day. The average homeowner doesn’t know the options available. We do.”

Now that her mortgage payments are manageable, Karen Southern is working on knocking down $13,000 in credit card debt. She has part-time work to supplement her full-time job. “You’ve just got to work hard, save and pay,” she tells me. “It’s just discipline, discipline, discipline.”

The bottom line
The recession is squeezing people who’ve never had a problem making ends meet before. It’s scary. But ignoring the situation won’t make it go away. The biggest mistake you can make is to wait too long before seeking help. Once you get behind, especially three or four months behind, it’s much harder to catch up. You need to find a reputable credit counseling agency as soon as you suspect there’s a problem.

As I’ve warned before, beware of phony debt relief outfits. They’ll take your money and do nothing – or make the situation worse.

Shop around for a good credit counselor. By doing your homework you should be able to find a service that doesn’t over-charge or over-promise. Here's a good place to start: The National Foundation for Credit Counseling. They'll help you find a certified counselor near you.

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