As some bring in the new year with cheer, others just see another year of cowering under what appears to be insurmountable debt.

And when you cower, you can become desperate and lose whatever common sense your mama or daddy may have passed on to you. Otherwise, I can't explain why someone would pay a company nearly $900 or more for the mere promise of helping reduce his or her debt.

One desperate reader from Rochester, New York, e-mailed me asking for help in persuading her husband against paying a Florida debt settlement company an upfront $895 fee. The company promised to help cut the $21,000 they owed in credit card debt. The wife said they began relying on credit cards after her husband found himself out of work after 24 years on the job.

"My husband was recently contacted on the phone by a company alleging it was a 'debt reduction' organisation," she wrote. "They are willing to guarantee a $3,000 reduction or our money back. They have power-of-attorney forms to be notarised. My husband wants to get moving on it. Is this a good idea?"

Debt settlement companies promise to act on your behalf to negotiate with your creditors to reduce your debts. But this is something you can do yourself.

Before I even began to look into the possibility, I suspected working with that company wasn't a good idea. There were just too many red flags. I didn't name the company because I don't want my warnings to be just about this firm, but about the growing practice of debt settlement.

Let's see if you picked up the cautionary signs in my reader's note. To confirm what I spotted, I contacted Gail Cunningham, senior director of public relations for the National Foundation for Credit Counseling. Here's what alarmed us:

— The company initiates contact. "They possibly purchased a list of consumers who were delinquent on their debts," Cunningham said. "Companies target vulnerable people who are desperate to get out of debt and make the collection efforts stop."

— The company requires a large upfront payment. Why doesn't it occur to people that they could use that substantial sum of money to pay down their debt? Equally troubling is that the company gets the money before delivering the service.

— The firm provides a guarantee for something it can't possibly control. How can it promise a $3,000 debt reduction? If I were Spider-Man, the exactness of that guarantee would have set off all my spider senses.

— A company they know little about wants them to sign power-of-attorney forms. Cunningham says often in these types of deals the customers are told to stop paying their bills and instead send money to the debt-settlement outfit to save up for a lump-sum offer. However, customers are often not informed of the risk of stopping payment and that creditors might still take legal action.

The person is instructed to have no contact with the creditor, and that the settlement company will take over. That's why they need to get the power of attorney, which allows an individual or company to act on your behalf. "This is a very slippery slope," Cunningham said.

OK, those were the red flags just from my reader's brief e-mail. But I didn't stop at my gut suspicions. I did a general search for the company on the Internet. On www.ripoffreport.com, a consumer complaint Web site, I found some disturbing comments from customers of the same Florida-based company. While sites like this are helpful, you do have to consider that many legitimate business dealings leave customers unhappy. Nonetheless, the comments about the company were insightful.

"I should have hung up, but due to my state of mind at the time, I did not," one customer wrote in her posting. The company promised a guaranteed savings of at least $5,000 in interest or her $895 back.

She got neither, she complained — no savings, no money back.

Additionally, search the Better Business Bureau database. I went to search.bbb.org and did a "Reliability Report" on this company. The BBB has given the firm a D rating, because of the short time it has been operating and the number of consumer complaints. BBB assigns grades from A to F.

I sent all this information to the woman in Rochester. She and her husband are going to take my advice and contact a nonprofit credit counsellor at www.debtadvice.org.

"I have a feeling there could be others in the same financial boat looking for that golden life preserver," she wrote back.

If one of your New Year's resolutions is to get out of debt, don't let desperation lead you to sign an insanely expensive, or worse, fraudulent debt settlement contract.

Listen to Michelle Singletary discuss personal finance every Tuesday on NPR's "Day to Day." To hear her reports online go to www.npr.org. Readers can write to her c/o The Washington Post, 1150 15th St., N.W., Washington, D.C. 20071. Her e-mail address is singletarym@washpost.com. Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.