I am 27 years old and work as a freelance artist and writer. For a few years I did quite well, but during the last year consistent work has been hard to come by. As a result, I have amassed almost $20,000 in credit-card debt. I held on too long to the belief that another lucrative freelance job was just around the corner. If I don't do something soon, I am going to start missing payments, something I have never done before.
A few friends have suggested either going to a debt consolidation firm or filing for bankruptcy. Telling a judge that I simply haven't managed my money well seems like a lousy excuse. But a friend said that if I go to a debt consolidation firm, it would reflect badly on my credit.
I know you are pretty harsh on people who display a lack of intelligence when it comes to their finances, so I am prepared to take my medicine.
You're not stupid, just young. You thought the good times would last forever, so you failed to cut back on your spending or establish an emergency fund to tide you over in the lean times that come to every freelancer.
Your first step is, obviously, to get a job - any job. You also need to stop using the cards and figure out ways to save money. Check out Amy Dacyczyn's book, "Tightwad Gazette," for the ultimate guide to frugality.
Stay away from for-profit debt consolidation firms. Instead, give Consumer Credit Counseling a call; the number is in your local phone book. This nonprofit group offers free classes in money management, as well as debt management plans.
The debt management plans are what may affect your credit rating, but if you're in danger of missing monthly payments, they are still better than bankruptcy.