<prompt> Human: A close friend of mine is in very deep dept. Due to some changes in her financial situation she has no reasonable way to pay off a lot of her debts. She has a contacted a debt consolidation management? company and they recommended the following strategy. Stop paying the debts that you know you wont be able to pay off. Allow them to go to collections. The debt management company will then negotiate to buy the debt on her behalf, and she will will then pay the debt management company after the debts go to collection.She realizes this will wreck her credit. As far as I know the only other realistic option she has is to declare bankruptcy. Is this a legitimate debt management strategy when youre in way over your head? Should she just be looking into declaring bankruptcy? Is there some other path?EDIT: Im not looking for best practices for debt reduction. Im not in a place to gauge her finances to that depth, or to offer that advice. What Id really like to know is if the advice shes getting to stop payment on everything so a debt company can buy the debt a realistic strategy. Is there any situation where that would be better than just declaring bankruptcy?Assistant: Anyone who claims that you should do this or that without A LOT more information is doing you a disservice. It depends on a lot of factors:A What kinds of debts are they? Secured? Unsecured? Student loans? Medical? Some debts cannot be discharged in bankruptcy and each type of debt has different remedies and consequences. B What are the total balances vs what she can realistically pay? Is she already in default? Making payments? stopped making payments?C What is her disposable cash-flow without the debts? IE: Can she afford some payment, or is she going deeper every day? D What are her cash and credit needs going forward? Does she have savings? Can she save more? Spend less? Take the bus instead of own a car? E What state does she live in? state law governs how debts, collections, judgments, and bankruptcies are resolved and they vary widelyF Many other questions about lifestyle, income, family, and other obligations that can impact the decision.The real question youre asking is: What action can she take that will solve her debt issues while minimizing the long-term consequences. And that cannot be solved by only knowing a small portion of the story. However, I will say that filing bankruptcy is IMHO the nuclear option. Yes, it will wipe out her debts except student loans, but say goodbye to reasonable credit with rates 18 for years to come. Its a very tough choice and usually a last resort. I somewhat agree with jkkpr - the underlying problem of HOW this happened is very important to solve, because the only thing worse than the situation shes in now, is getting right back into it again.Human: Thanks for the good questions.A Mostly credit card debt. A little bit of student loans, but I believe the vast majority is credit card. A little bit of it is a car lease that shes trying to get out of by a lease trade or something similar.B I dont have numbers. I believe she just stopped making payments this month. As far as I know nothing is in default yet.C She can make some payments, but I dont believe she can make minimum payments on everything.D Im certain she has no savings. Im not sure what her vehicle plan is. I do know its an area shes the msot focus on.E CaliThe gist of the situation was she got out of a relationship, and she now has to pay for a lot more basic things, like housing, than previously. She also lives in a very high cost of living area.Im not in a great position to help her manage her debt. However, what I really want to know is if the company shes working with is working for her best interests. Is the guidance to stop payment and let everything go to collections reasonable in any situation?  <response>: B is really important here. If she isnt in default yet she needs to call the card issuers immediately and ask for rate reductions before she does go late. So far as they know shes current on the debt and will be happy to reduce the interest rate in order to not lose a customer. This can have a huge impact on her bills.Back when I was in a similar situation doing this literally slashed by bills by over a third. All I had to do was pick up the phone and ask. 