Most credit card debt is unsecured, with the exception of cards issued against a line of credit on a house or other asset. Millions of consumers are carrying more consumer debt than they can afford, making minimum payments or carrying balances at high interest rates. Even when this is not the case, a change in circumstances such as loss of employment or medical emergency can result in late payments, lowered credit scores, and a snowballing cycle of spiraling debt and default.

Consolidation of credit card debt onto a lower-interest card can be helpful. Many consumers have taken advantage of home equity credit lines or second mortgages to consolidate credit card debt, converting unsecured debt to secured debt – and increasing risk to their home in the process. If a borrower is in difficulty, adding unpaid credit to their mortgage balance may offer temporary relief and lower payments, but it’s likely that the unsecured debt will increase again, with the now-higher mortgage obligation decreasing available income to repay it.

In the event of financial calamity, unsecured debt should receive a lower priority for repayment than taxes, home, car or student loans. It may be possible to negotiate a lower interest rate with your lender, or if you’ve gone into default, credit card companies will offer settlement on a reduced balance. The difference between the settlement and the balance may be declared as a payment to you by the credit card company via a 1099, giving you a potential tax liability.

Credit card debt settlement companies charge huge fees to negotiate settlements with credit card companies, often without successfully settling the debts. If you’d like to try to settle a debt, direct negotiation with your lender is often the best option. If your circumstances are serious enough, consult with a qualified attorney to find out if a bankruptcy filing is your best option. If this is the case, your attorney will advise you to stop paying all unsecured debt and have it managed in the bankruptcy proceeding. Your debt may be wiped completely in a Chapter 7 bankruptcy filing, or partially repaid in a Chapter 13 plan that allows you to restructure your finances.