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Bankruptcy and you - what are the options?

There are many reasons why people end up filing for bankruptcy protection. But no matter what the reason, whether it is a Chapter 7 personal bankruptcy or a business filing for Chapter 11 protection, the decision is usually not an easy one. For most people bankruptcy is an option of last resort, but it can be easy to forget that it is actually the best option in many situations. Nonetheless, a recent article offered a few tips for those who are facing financial challenges but are still hoping to put off a bankruptcy filing.

One tip was to contact a credit counselor or otherwise seek out the many options for coming up with a sensible plan for attacking a debt burden. This can be a tricky option though, because it can be hard to determine which options are legitimate and which are scams. News stories abound of people all over the country who have fallen for "debt relief" scams in their attempts to obtain one large loan with a lower interest rate in order to pay off several different debts that have higher interest rates. Knowing the difference between legitimate services and scams would be crucial if this tip is followed.

Another tip was to contact creditors and explain your financial situation and the hardships you are going through. Although creditors are usually by no means obligated to help you in any way, some may want to provide some form of temporary relief as a means of ensuring that the debt will continue to be paid in the long run.

Lastly, examining the household finances might reveal a bit more cash in the budget than you originally thought there was. Asking the hard questions about whether or not you really need cable or satellite TV service, or perhaps taking on a small part-time job in your extra time, could make a big difference in a budget.

It is always good to examine all of the options in a tough financial situation. However, for those individuals and families who aren't in a position to address a debt burden through repayment efforts, a personal bankruptcy filing could be the one option that would help the most.

Source: Fox Business, "Three Tips to Preventing Personal Bankruptcy," Donna Fuscaldo, Feb. 21, 2013 

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