Bankruptcy
We've all heard of bankruptcy, but quite frankly it's not as bad as most people think. Companies out there selling other forms of debt relief always have a tendency to vilify bankruptcy in their commercials and advertisements. "Get out of debt now WITHOUT BANKRUPCTY!" (Akk! Fire! The sky is falling!)
C'mon, bankruptcy was created as a way to get out of debt when you just can't pay anymore. Our country was founded on several core principles and one of those principles was "no debtor prison." All forms of debt reduction or elimination (in other words not consolidation), will negatively affect your credit. Bankruptcy does stay on your credit report a bit long than it used to, ten years now as opposed to seven years. However, the people who are vilifying bankruptcy are . . . that's right, you guessed it, the credit card companies!
It's interesting though, because money truly talks. I (the author of what you're reading right now and one of the co-founders of Victim of Debt) have gone bankrupt and was able to buy a house within 3 years after that. I did have to pay 10% down on the house, but if you can quickly rebound financially, you'll still get credit and a lot quicker than you'd think. A good job and simply saving money to put down on things, really helps. I was also able to get a loan for a $40,000 car just 4 months after I bought the house, but I put down about 20%.
Quite frankly, it was refreshing to not have debt and not be able to get credit so quickly.
These days you will actually see credit card companies almost immediately start sending you card applications. The evil credit card companies actually call people who have bankrupted their "bread and butter". The reason is this, 1) they know you like and probably desire to use credit and 2) after a bankruptcy you cannot declare again for 10 years, and during that 10 years it's illegal for you to not pay your debts. So, obviously if you get a credit card, once you use it, by law you must pay it back.
If you are getting to a point where you are simply unable to pay, it is my humble opinion that positive psychological impact declaring bankruptcy has on you, is well worth trading the negative impact it has on your credit. But that's just my opinion.