The average American adult carries more than $16,000 in debt (excluding home mortgages)- and that figure is likely to climb. 

The best paths out of debt, starting with those most appealing to the largest numbers of debtors...

Credit Counseling

A nonprofit credit counseling agency might be able to help you set up a three to five year debt repayment plan.  Anyone struggling with debts should give this a try.  The agency will negotiate with your creditors to try to lower your interest rates and perhaps get some fees waived.  Unfortunately, not all of your creditors are likely to agree to do this, but at least some will.  Once the repayment plan is in place, you send a single debt payment check to the agency each month, and it distributes the money to your creditors.  Credit counseling agencies also provide useful money management advice. 

How to get started: Select a credit counseling agency that has been in business for at least 10 years and has been approved by the US Trustee's office.  (On the Department of Justice Website, www.usdoj.gov, select "A-Z Index" at the bottom of the page, then click "Credit Counseling and Debtor Education", then "Approved Credit Counseling Agencies.")  Expect to pay an initial fee of perhaps $50 and a monthly fee of $30 to $50.

Drawbacks: If your debts are so great that there is no feasible way for you to pay them back within three to five years...or you have lost your job and cannot pay off your debts at all in the near term, a credit counseling organization will not be able to construct a debt-repayment plan that you can afford.

Helpful for home owners: The US Department of Housing and Urban Development (HUD) sponsors free counseling agencies that provide advice on credit issues, mortgage loan defaults and foreclosures.  For agencies in you state, go to www.hud.gov/offices/hsg (click "Single Family", then "Housing Counseling").

Retirement Account Loan

If you have a 401 (k) or 403 (b) retirement account or a pension plan where you work, it's likely that you can borrow against the value of your account or plan so that you can pay off other debts.  These retirement account loans generally are capped at either $50,000 or 50% of the amount in the account, whichever is less, and must be repaid within five years.  You might be allowed to borrow up to $10,000 even if this represents more than half of your account balance.  (If you have a defined-benefit pension plan, the amount you can borrow may be determined by the number of years you have worked for your employer or some other formula.)  Interest is charged-typically 6%to 8%- but this interest is paid to your own retirement account.  Ask your employer's retirement-plan administrator whether you can borrow. 

Retirement-account loans do no require credit check, which makes them particularly attractive for people with low credit scores. 

Drawbacks: Retirement-account loans that are not repaid within five years are treated as distributions, triggering income taxes and a 10% IRS penalty.  If you change or lose your job-a concern in this economy-your employer might require you to pay back the loan immediately.  Money borrowed from your retirement account misses out on tax-deferred growth until it is repaid.

Personal Loan

Personal loans are unsecured loans with interest rates that can be well below typical credit card rates.  Consolidating credit card debt into a personal loan can lower debt costs so that debts can be paid off sooner.

Many banks have stopped issuing personal loans in this credit crunch.  Try local credit unions or a "social lending" company instead.  Social lenders bring together borrowers with investors who wish to make loans to earn interest.  Reputable social-lending companies including Lending Club (866-754-4094, www.lendingclub.com) and Pertuity Direct (866-630-8547, http://pertuitydirect.com).  Borrowers typically pay interest rates of 10% to 12% for three year fixed-rate loans of up to $15,000.

Drawbacks: Only borrowers with credit scores above 660 to 680 are likely to qualify.  Loans rarely exceed $5,000 to $15,000, not enough for any people who are deep in debt.  Loans typically last just 36 months, so sizable monthly payments are required.

Home Equity Loan

Home-equity loans and home-equity lines of credit (HELOCs) let home owners borrow against the equity that they have in their property-assuming that they have any equity left after the recent real estate declines.  (A home equity loan provides cash in a lump sum, while a HELOC provides revolving credit.)  This money can be used to pay down high-rate debt.  Falling property values and increasingly cautious lenders have made these loans difficult to obtain, but most home-equity loans typically carry interest rates of just 5% to 9%, and the interest paid on these loans usually is tax deductible.

Drawbacks: If you pay off credit card debt with a home-equity loan or HELOC, you are trading unsecured debt for secured debt (your home is the collateral)- and you could lose your home if you fall behind on debt payments.  Adding to the amount that you owe on your home could make it harder to sell the home and move.

Debt-Settlement Firm

A debt settlement company will attempt to convince your creditors to accept less than you owe, perhaps 50 to 60 cents on the dollar.  That's very different from a credit-counseling company, which will attempt to help you pay back the full amount that you owe but with lower fees and interest.  Your creditors might accept these terms if they believe that you will otherwise default on your loans.  To increase its leverage, the debt-settlement company often will instruct you to stop making debt payments while it negotiates.

Choosing a debt settlement company: Reputable companies charge mainly based on the amount that they save you-not the amount you owe- with only modest up front-fees.  That might be a set-up charge of a few hundred dollars and 15% to 25% of the amount you will save.  Reputable companies also warn clients about the downsides of debt settlement (see below).  The firm should propose a plan that will have you out of debt in less than 36 months- any longer and creditors are more likely to sue than accept the terms.  It's a good sign if the debt-settlement company has been in business at least 10 years and belongs to the Association of Settlement Companies (www.tascsite.org).

Drawbacks: You are likely to be besieged by calls from collection agencies and might be sued by your lenders when you stop making loan payments.  There are any number of disreputable debt-settlement companies that charge high fees but do little for their clients.  You may owe income taxes on any debt that is forgiven.  Working with a debt-settlement company will harm your credit ratings-perhaps severely.  The size of the hit depends on the current status of your debts.  If you are already behind on payments to multiple creditors, entering debt settlement might not make a huge difference.  If you have not missed any payments yet, debt settlement is the equivalent of defaulting on all of your loans and your credit score could drop by more than 100 points.

Bottom line: Debt settlement is a viable option only if your debt problems are so substantial that you see no other way to pay off your debts and if you take extreme care to use an honest debt-settlement company.

Bankruptcy

It might be possible to cancel your debts through a Chapter 7 bankruptcy...or reorganize your debts through a Chapter 13 bankruptcy despite the hurdles recently added to the bankruptcy process.  Discuss your options with a bankruptcy attorney-bankruptcy laws are too complex to sort out on your own.  Select an attorney who is a member of the National Association of Consumer Bankruptcy Attorneys (www.nacba.org).  The initial consultation typically is free.  Expect legal costs of around $900 to $2,000 if you do file.  If you cannot afford this, contact your state's bar association and ask if there's a state legal aid society that can provide a lawyer for less or for free.

Drawbacks:Bankruptcy will devastate your credit rating and remain on your credit report for 10 years, compared with a maximum of seven years for other credit missteps.  Certain debts-including child support, alimony and student loans- might not be discharged by bankruptcy.  Recent changes to bankruptcy laws make it impossible for some debtors who have large amounts of disposable income to qualify for Chapter 7 bankruptcy at all.  Many of your assets could be seized.