I actually enrolled in a debt negotiation/settlement program (Arbitronix) back in the beginning of '04. I was finished with the program (with all enrolled credit balances settled/paid) by the end of '05. They estimated it would take 2 years, and it pretty much did. My credit scores TANKED (well below 500) - as they would when you stop paying your bills... I did, however, maintain my American Express account and my primary credit union credit card (where I held my checking account) open and in good standing throughout the entire program.
Once all accounts were settled/paid, I went about the process of pulling all 3 credit reports and began to clean them up, challenging anything and everything. By the time I was looking to purchase a home in early '06, I had brought my scores up to about 585 - mind you, this is while having a couple of remaining credit accounts current and in good standing. I was able to take and advance on my salary in order to bring my existing credit balances down to 50% of their limits, and with that final step, I had my scores up over 600. My mid was 619, got a waiver for my home loan and i've been in my house since May'06. Now, my rates aren't anything to get excited over (7.8% & 11.2%) - gosh, it hurts to just TYPE those numbers! BUT - I got 100% financing and was able to buy my first home, all by myself, no co-signer (at 33 in the Bay Area)...
Now, my advice to you is to keep a couple of accounts current - if anything they may be your only avenue for additional credit once you are done w/ the program and trying ot rebuild your history. ALSO - understand that you will want to keep track of the AMOUNTS OF DEBT THAT AREN'T PAID (written off/settled) because when tax time comes, you will have to count that as income. This was a detail I was NOT aware of when I got into the program. Lastly - be sure to keep all of your paperwork for the credit accounts you enroll and all correspondence... you never know when it's going to come in handy for disputes or back up when cleaning up your credit files with the 3 credit agencies.
Best of luck to you - hang in there and bite the bullet... you can get things paid and behind you and then you can work diligently to restore your credit. I am now into the mid-680's! I can be done!!
btw - sorry to be so long-winded...