| What is bankruptcy? | | | | self-professed counselors who will |
| Bankruptcy is a process by which a | | | | charge high fees and whose services may |
| debtor can obtain court-ordered relief | | | | be of little value. Consider utilizing a |
| from his debts. While bankruptcy can be | | | | non-profit financial counseling service. |
| a valuable necessity in some cases, not | | | | |
| everybody who faces financial difficulty | | | | "Working Out" Your Debts |
| should file for bankruptcy. | | | | Some creditors will work with debtors, |
| Should I declare bankruptcy? | | | | even waiving part of a delinquency or |
| There is no "quick and easy" answer to | | | | waiving interests on a debt, provided |
| this question. You should discuss your | | | | the debtor agrees to make payments on |
| situation with a credit counselor or a | | | | the debt. Sophisticated creditors know |
| bankruptcy attorney, to evaluate the | | | | that some debts can be hard to collect, |
| costs and benefits of bankruptcy given | | | | even if you don't declare bankruptcy. |
| your personal financial situation. The | | | | Collection agencies often take a |
| type of debt you owe can be a | | | | percentage of the debt they collect as |
| significant factor. Factors which may | | | | payment, litigation can be timely and |
| affect your decision to file for | | | | expensive, and forcing a bankruptcy may |
| bankruptcy protection are detailed in | | | | result in an even smaller recovery. |
| this associated article: Filing For | | | | Refinancing |
| Personal Bankruptcy Protection in a U.S. | | | | If you own a home, and have some equity |
| Court. | | | | in the home, consider refinancing your |
| What are the alternatives to bankruptcy? | | | | home to pay off all of your high |
| There are numerous alternatives to | | | | interest debt. You may be able to obtain |
| filing bankruptcy. Determining which, if | | | | long-term financing at a much lower |
| any, are appropriate for you depends in | | | | interest rate, allowing you to |
| large part upon your personal financial | | | | consolidate your debts, lower your |
| situation. It is a good idea to seek | | | | monthly payments, and obtain a tax |
| financial counseling prior to making a | | | | deduction in the process. |
| decision as to whether to file | | | | Please be careful when dealing with |
| bankruptcy, or regarding which | | | | companies which offer to combine all of |
| alternatives may work for you. Possible | | | | your debts into a single "low payment" |
| alternatives include: | | | | loan. Some of those companies collect |
| Financial Management | | | | large fees while offering a loan package |
| While it means giving up a great deal of | | | | that is inferior to that which you could |
| control, you may wish to utilize a | | | | obtain through a bank or credit union. A |
| financial manager to pay your bills, and | | | | poorly structured loan may leave you |
| to put you on an "allowance," until your | | | | paying interest for years, while making |
| finances are back in order. This can be | | | | essentially no progress on paying down |
| particularly helpful if your financial | | | | the principal of the loan. |
| problems emerge from bad spending | | | | Avoiding Credit Repair Scams |
| habits. You may also wish for a less | | | | Whether before or after bankruptcy, many |
| intrusive form of management, such as | | | | people are attracted to offers to |
| simply having a financial counselor help | | | | "repair bad credit" or even to "remove" |
| you create a budget. | | | | a bankruptcy from their credit history. |
| Choose your financial counselor | | | | Most such offers are fraudulent. |
| carefully, as there are many | | | | |