With the current financial climate being so gloomy, many people are getting further into personal debt.
If you are struggling to cope with your debts, you are not alone! You may have considered filing for bankruptcy.
It's made to sound really easy by companies who sell bankruptcy solutions.
You'll be able to start afresh, and all your personal debt will be gone.
While bankruptcy can seem like a great idea, there's an awful lot more to it than if you listen to the bankruptcy lawyers and companies who profit from it.
However, before we consider some reasons why bankruptcy may not be your best option, you need to realize that it probably isn't your fault that you ended up in debt in the first place.
When you charged purchases to your credit card, or took out personal loans, you had every intention of paying the money back.
Perhaps you encountered an unexpected setback which meant you couldn't repay your debt, or perhaps your income was drastically reduced.
However you got into this situation, you're at the stage where you need to do something.
If you can pay off your debts in a relatively short space of time, do not consider bankruptcy.
To find out if this will be possible, you need to make a list of all your debts, and then work out how much you need to pay each month to clear them.
Work out long it will take if you pay the minimum amount each month.
Remember that you will clear your debt much more quickly if you can afford to pay even a little more than the minimum amount.
However, don't forget that your income needs to be more than your debt payments, when you have subtracted the amount of money you need to live on.
When you've done your calculations, does it come out at less than five years? If it does work out at less than five years, then you should be okay, and you should not consider bankruptcy.
If you think that bankruptcy is your only option, then you must realize that not all debts will be wiped out.
The two notable exceptions will be any child support that you owe, or if you have a student loan.
These financial obligations cannot be removed by going bankrupt.
Bear this in mind before you consider bankruptcy.
Credit will be difficult to get for ten years after going bankrupt.
In fact, any type of credit which needs a credit check will be difficult, so a new house or car will be difficult to get on credit.
As your bankruptcy stays on your credit report for ten years, creditors will generally be unwilling to risk taking you on.
So, in a nutshell, if you think that bankruptcy is an easy way out of your debts, then you must think again.
I'm not saying you shouldn't file for bankruptcy, but it's important that you know the pitfalls as well as the positives.