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In Part I of our Dolans' Debt Clinic, we talked about how to manage your debt most effectively. But you may be saying, "Hey Dolans! My debt is out of control. I need even more help." Or maybe you just need some more advanced strategies for climbing out of debt.

No matter what your situation, we recommend everybody read on to make sure you know all of the strategies you can use to get your debt under control.

Let's start with the big question: How do you know when your debt is out of control? There are several telltale signs:

1. When you have too many days left with no money at the end of the month.
2. When your account is down to a negative balance before your next payday.
3. When you are simply not able to pay your bills with current income.
4. When you don't know how much you owe.
5. When you are paying off (or simply paying down) one credit card bill by charging it to another card!

Let's start with the worst-case scenario. While following our advice will help you take control, if your debts are so large they've seized control of you then we recommend you seek help from a consumer credit-counseling program, which will help you work out a repayment plan and act as intermediary between you and the credit card companies and collection agencies. Be aware that working with a credit-counseling program is one more piece of data that could wind up on your credit report, but it will also show that you're making a valiant effort to clean up your debts.

Dolan Smart Money Move : We get a lot of questions from people about for-profit credit-counseling centers. Beware! Some of these places will tell you, "For $2,500 we can get all the bad information off your credit report." A lot of people get scammed this way. You should know that even some of these legitimate counseling groups are actually funded by the credit card companies! Talk about the fox guarding the chicken coop! They may advise against filing for bankruptcy, even if that could be your best option, because it isn't in their best interest.

We don't want you getting scammed, so here are some warnings from the Federal Trade Commission. Don't trust a company that promises to restore your credit and then tells you:

• "Don't worry; we'll fix it in no time." There is no quick fix for heavy debts. You need to pay your bills on time and stick to a budget (we prefer to call it a "success plan"!) in your spending.
• "Pay us $XX now and we'll get back to you." Federal law prohibits credit counselors from collecting money before they perform services.
• "We can get you a new credit identity." It is flat-out illegal to make this claim, and illegal for you to change your identity with a new credit or tax ID or a new Social Security number.
• "We can remove all the bad news from your credit report." Wrong! They can't take information about bankruptcies, judgments, tax liens, or delinquencies off your report. Anyone who claims to be able to do so is lying.

We often refer our listeners to reliable sources for debt help. One is the National Foundation for Consumer Credit, an organization of nonprofit counseling agencies. It's on the Web at www.nfcc.org, or you can call their 24-hour hotline at 800-388-2227 (800-682-9832 for service in Spanish). The NFCC has 1,000 counseling centers around the country. Operators will find a member office in your area or, if there isn't one near you, will set you up with a telephone counselor. The initial consultation is free; after that, you will pay a monthly fee of up to $50 while you are in the program.

Also, get a copy of Surviving Debt: A Guide for Consumers , 6 th edition , published by the consumer group the National Consumer Law Center (NCLC). The book can be ordered through the NCLC at 617-523-8089 or www.consumerlaw.org.

There is also very helpful information at www.www.gerridetweiler.com from our friend Gerri Detweiler, who has been a guest on our radio show many times.

If you try to go it alone, you'll have to negotiate with the collection agencies. Have your credit report in hand and be honest. Tell them you have a problem, whatever it is that's preventing you from making the payments. You need to contact them; don't wait for them to contact you. Start paying more than the monthly minimums required on your cards (as we talked about in Part I). Otherwise, it could take you 35 years to get rid of the debt! Then, of course, you have to budget. A credit-counseling agency can help you do all of this.

Emergency Sources of Money

There are some other steps you can consider if your debts are truly out of control. None of them are ideal, but sometimes they are necessary. Here are a few you may need to look into, in descending order from most desirable strategy to least desirable :

 1. A "Consolidation" Loan. We generally discourage taking on new debts to pay off old ones. However, if you're burdened with a lot of high-interest credit card bills, it is a good idea to go to a credit union or local bank and get a low-interest loan to pay off your other loans (in short, consolidate everything). This way you'll be spending less money in the long run because your monthly interest rates on the new loan should be lower.

Whatever you do, don't start running up new charges and don't let the low-interest loan lead you into the temptation of spending again! The purpose of this loan is to get you out of debt and improve your credit rating. Make this your mantra.

 2. A Home Equity Loan. Using the roof over your head as a piggy bank to pay off other debts has become the most popular form of a consolidated loan. Equity is the difference between your home's appraised—or fair market—value and your outstanding mortgage balance.

Dolan Smart Money Move : A home equity loan might be a good idea if you haven't tapped into your equity before and you're willing to lock up those cards and not use them again until the loan is paid off. But the odds are against you; statistically, one year later people who have used home equity loans to pay off credit card debts are back in plastic debt to the tune of as much as before or even more. Plus, they now have an extra home loan to contend with! This is a situation that can be costly if you're not careful. Once again, let it not lead you into temptation.

There are three basic types of equity loans:

• A term (or closed-end) loan, or a line of credit on your equity is technically a second mortgage. They are usually for a shorter term than the mortgage you used to buy your home in the first place, typically with a life of five to 15 years.
• A term loan is a one-time lump sum with a fixed interest rate and the same payments each month. Once you get the money, you cannot borrow further from the loan.
• A home equity line of credit (HELOC) is more like a credit card—yet another one. You can borrow up to a certain amount for the life of the loan, and even withdraw money as you need it.

Dolan Smart Money Move : We don't believe in using your home as a piggy bank, so we're not fans of HELOCs. If you must borrow using your home as security, get a fixed-rate loan. That way there will be no interest-rate surprises for the life of the loan. Check www.bankrate.com for the best rates in your area.

3. Your Retirement Account: Your IRAs, 401(k), 403(b), etc. In eight little words: DO NOT USE THIS ACCOUNT TO PAY DEBTS. But if you're totally stuck, as a last-ditch effort before bankruptcy, you might tap into a retirement account. Some people think, "I've got this 401(k) at work and I'll use it to pay off my debts." Don't do it unless it's absolutely your only alternative to bankruptcy!

Know Your Rights

This is still America and no one ever goes to debtors' prison. Even if you are in serious debt, it is illegal for a debt collector to inform your employer or neighbors about your debt, call you late at night or at work, or engage in any other form of unfair harassment. If someone does hound you, call and write to the Consumer Protection Office of the attorney general in your state and report the calls. This office should contact the outfits that are after you. At the very least, you can tell the next collector who calls that you know this is illegal harassment and you've reported it; then send them a copy of the letter you sent to the Consumer Protection Office.

No matter what your situation, don't give up! We've heard countless stories of people who have climbed their way out of debt. We've done it ourselves and we know you can do it, too. But you have to get started today. Don't wait any longer. Read back through our advice, decide on your first step, and take action.

If you missed Part I of our Debt Clinic, you can read it here.

And don't forget to let us know how you're doing. Remember, we're here to help!