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EAR HARRY:

About a year ago, I followed your advice to another reader and went to a nonprofit credit- counseling agency. They did me a lot of good. Some of my debts got reduced and I started to make one payment to the agency for all my accumulated credit-card debts (about $40,000). Then things started to get tight again, and I skipped a mortgage payment. Bad mistake. They just about killed my credit report. I'm having a lot of trouble keeping up both the payments to the agency and to the mortgage bank. A neighbor, whose son is a lawyer, has been urging me to call his son to discuss bankruptcy. I'm so darned afraid of this that I can't express my fear in words. My wife is so worried that it will change our lifestyle so much that we may have to sell our home and move to a less-expensive area. What do you think?

WHAT HARRY SAYS: Your last statement is very revealing. I think that house has gotten you into a hole with no bottom. You moved to an area that you just cannot afford. The cost of everything, from an apple to a pair of shoes, is higher in your neighborhood. You must learn to live within your means, bankruptcy or not. With an improvement in the housing market, it should not be difficult to sell the house and move to a less-highfallutin neighborhood. This move will go a long way toward solving your problem. In the meantime, see if you can get a reduced payment to the agency to tide you over. I'd try to avoid bankruptcy, if possible.

Write Harry Gross at the Daily News, 801 Market St., Philadelphia 19107.