Let me apologize for some previous posts that weren't very nice or helpful. Some people will use any forum to vent their frustrations and stand in judgment without knowing you or the details of your personal situation. It's good that you are doing all you can to address the situation you're in rather than doing nothing, sticking your head in the sand and hoping it'll go away.
Only you can determine what is best for you and your family and your long term wellbeing. These are unprecedented times and require unprecedented action.
Let me just advise that I wouldn't recommend using any consumer credit counseling agency to assist you (and if you do make sure it's a reputable one CCCS = National Foundation for Credit Counseling (800) 388-2227 www.nfcc.org.). Basically how they work is that they are non-profits and will contact your creditors asking that they reduce your interest rate and write off a portion of your debt (thereby "donating" the balance they write off to the agency itself). The consumer counseling agency will then try to collect the portion that was written off from you. This is how they make their money. But the effect for you will be that your credit reports will reflect that you are working with this agency and all of your credit accounts will be closed and will also reflect the settlements thereby ruining your credit anyway IMHO. You can do it yourself. Or go talk to a lawyer to see if BK might be a better option or to write a letter for you that you'd send to various creditors.
Following are other suggestions to consider:
#1 First call each creditor and ask if they can lower your interest rate. Try to negotiate the best rate or ask if a promotional rate is available or transferred balances or even look into getting a new credit card with a balance transfer promo. Suze Orman's website suzeorman d*t com might have a script for you to negotiate down your interest rate and might have other great info too.
#2 Pay off the card with the highest interest first and the rest in descending order.
#3 Call to see if each creditor has a program to assist you.
#4 Consider Peer-to-Peer lending to get lower interest loans from various individuals via websites like prosper.com or lendingclub.com
#5 If you are going to offer settlements to a company, I'd do it in writing and try to stipulate that the account would be removed from your credit reports all together. But you will be more successful with this and creditors will settle for a smaller amount if you can borrow cash from family to pay off the card settlement amount versus negotiating a payment plan. You might even give them two options, one 20% paid in full and they remove the account from your credit report or another option at 30% with payments and of course zero interest. They can counter from there. It might also help your case if you give a detailed accounting of your financial situation, including sending in bank statements. Creditors will likely close any accounts you settle unless you can somehow include this in the negotiation.
Here's a link to a "Pay for Delete" letter. It doesn't totally apply to your situation, but you can get some of the deletion language from it
http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/PFD-Example-Letter/m-p/4519
#6 I would offer less than 50% though as the creditors will either accept or counter. If you offer at 50% you won't have wiggle room. If you can borrow the cash from family, the creditors will settle for a smaller amount than if you have to make payments because they are still taking on risk to accept payments.
#7 You mentioned that you only want to negotiate with a couple creditors. Make sure the ones you are planning to keep are not creditors that will raise your interest rate or close the account if derogatory credit info hits your reports. I was on temporary disability years and years ago and couldn't pay my credit card bills. I kept my AmExp green card and had to let the others go. AmExp never raised my interest or canceled the card. Not sure how they'd be in this credit climate though. And note that any debt negotiated down or charged off is considered taxable income to you (minus interest and penalties I think) so check with a tax professional about this.
#8 I'm assuming you've already done this, but if not, write down every penney you and your wife spend. Take a look and see what you can cut out of your budget. Really get to the nitty gritty of NEEDS versus WANTS. Also maybe do an intense spring cleaning and sell whatever personal belongings you no longer use or that you don't really use frequently. Do I also recall that you have two mortgages? You may want to look into selling one of your homes. Or check and see if a Deed Inlieu option applies in your situation.
Just remember not to beat yourself up. Sounds like you are a hard worker and you are in good company with so many others who are struggling in this economy. Just do the best you can -- it's all any of us can do. And yes we make mistakes and poor judgments sometimes, but as Maya Angelou says, "When we know better, we do better." Best wishes to you!
