I see this all the time, a forum thread, where a webmaster knows his rankings are suffering in Google because he was hit by Penguin because he has a lot of really bad, manipulative links. A WebmasterWorld thread sums up the issues a webmaster in this predicament is in.

(1) They hired an SEO company
(2) That SEO company ranked them well for years
(3) Then Penguin smashed their links
(4) They no longer rank as well
(5) They are upset with the SEO company
(6) They need to figure out how to rank again
(7) Removing the links are the only option
(8) But removing links that were the result of their initial good rankings won’t help them rank immediately

In this thread, the site owner sums it up as:

It is sad, indeed. But you need to disavow the links, that is for sure. Those links are not helping you and they are now hurting you. Remove the hurt. Then get people to link to you because they want to link to you.

But which links should you remove? Which links are actually hurting you. That is the hard question. One SEO offered his advice:

Of course, there are tools, like Link Detox, Majestic SEO, AHREFs, Moz and others. But we are assuming you have the tools already or you manually go through all your links within Google Webmaster Tools. And when you disavow, make sure to disavow on the domain level.

Forum discussion at WebmasterWorld.

Image credit to BigStockPhoto for santa penguin