They essentially call up all your creditors and tell them that you will probably go into bankrupcy and not pay them unless you can work something out. They then negotiate a reduction in your interest rate, a reduction in your debt, and a new lower payment. That is the good part.

The bad part is that the lender is then taking a loss after lending you money. Like the friend that always mooches and doen’t pay their share, it makes other lenders less likely to lend to you. This will lower your credit score for a while and the credit negotiation will be noted on your credit report.

Your $4,000 may be uncomfortable, but it is definately manageable. Do what you can to work this out without going through the counseling. Try getting a second card and transferring the balance – thry will often give you a low transfer rate for a few months. This will give you a chance to get ahead in your payments (keep paying as much as you can even though the minimum payment is less).

Remember, a good reputation is invaluable. You need to protect it and build it up. Just because you can borrow money doesn’t mean you should.
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