Sometimes people find themselves in financial quicksand. When creditors begin to hound them, they often think that filing for bankruptcy is their only option. Some, however, are hesitant to declare bankruptcy, having a strong desire to repay their debts and deciding the cost of bankruptcy is too high—filing fees, loss of possessions and dignity and a black mark that will stay on their credit report for years.

Some people wisely turn to credit counseling agencies for help in getting themselves back on a solid financial footing.

Credit counselors use several broad strategies to help their clients. They often ask for a list of every debt and may advise keeping a log showing where every dollar is spent to force people to focus on where their money goes. When the client is aware of the real financial picture, the counselor can then give him sound financial advice, including showing him where he can cut expenses, negotiate with creditors and set up a repayment plan.

All of that sounds like a wonderful service to debtors, and it can be. But, as is the case with many things in life, it's not necessarily that simple. To find a credit counseling service that will truly help you will require some effort.

First, you should know about several industry groups in the credit counseling business. For more than 30 years the Consumer Credit Counseling Service (CCCS), based in Sacramento, California, has helped people with financial problems. It is part of a group of agencies structured as social service organizations. However, the efficiency and quality of employees can vary widely in the CCCS's offices across the United States.

Personal contact with the Atlanta, Georgia, office of the CCCS left a favorable impression of a relatively well-run operation. The CCCS says it is willing to work with any American citizen living at home or abroad. Call the service toll-free at (800) 251-2227. Services are free, with a suggested donation. Visit the CCCS on the Web at www.cccsatl.org to download and fill out worksheets before an initial consultation. Services are available in English and Spanish.

A newer breed of commercially driven counseling service has also sprung up, forming the Association of Independent Consumer Credit Counseling Agencies. Members of this group often offer services that are more efficient than those of the CCCS, but their fees, quality of assistance and education level of their staff members fluctuate widely.

Second, even though a credit counseling service may operate as a nonprofit organization, such status does not mean it can help you at no cost to you. Nonprofit status simply means the service pays no profit to owners or investors. Such status also may give the service a better chance of convincing creditors to reduce the balances of what they are owed in exchange for a better chance of receiving at least partial repayment of the debt. Creditors are well aware of the competition in this growing field and are beginning to offer less in the way of balance reductions via counseling services. Most credit counseling services, whether for profit or nonprofit, charge a small fee for their services.

Third, the credit counseling industry comes under little government oversight. In the United States only 17 states monitor credit counseling services, which contributes to the wide variation in staffing and quality of help consumers will find.

Obtaining credit counseling can be a great alternative to bankruptcy. But, like any other area of life, it pays to do your homework and educate yourself before committing to something as critical as a blueprint for your financial future. Credit counselors are not a quick fix. You will still need to have the vision to stick with a budget and work hard to find your way out of financial trouble. Connecting with the wrong counseling service—obtaining bad advice or poor service or paying high fees for the service—can leave you in worse shape than when you started.

The Federal Trade Commission warns that firms claiming they can erase your bad credit and remove bankruptcies, judgments, liens and bad loans from your credit file are likely indications of a scam. According to an article at the agency's Web site (www.ftc.gov) titled "Consumer Protection, Credit Repair: How to Help Yourself":

"Every day, companies target consumers who have poor credit histories with promises to clean up their credit report so they can get a car loan, a home mortgage, insurance, or even a job once they pay them a fee for the service. The truth is, these companies can't deliver an improved credit report for you using the tactics they promote. It's illegal: No one can remove accurate negative information from your credit report. So after you pay them hundreds or thousands of dollars in fees, you're left with the same credit report and someone else has your money."