10 Pieces of Bankruptcy Information Everyone Should Know


There are Alternatives to Bankruptcy

Working with a credit counselor to set up a debt repayment plan is one alternative to bankruptcy. Often the counselor can negotiate with your creditors to lower your payments. Steve Debenport/Getty Images
Working with a credit counselor to set up a debt repayment plan is one alternative to bankruptcy. Often the counselor can negotiate with your creditors to lower your payments. Steve Debenport/Getty Images

While bankruptcy is certainly not the end of the world, it should not be entered into lightly, either. A bankruptcy on your credit report will severely limit your ability to buy a home, a car or qualify for business loans. If you find yourself in dire financial straits, consider all of your options before filing for bankruptcy.

The first place to start is with a credit counselor. A warning, though — there are lots of unscrupulous businesses out there selling themselves as debt consolidation services promising to lower your payments. Unfortunately, some of those are scams. To find a reputable credit counselor in your area, visit the Department of Justice's Credit Counseling and Debtor Information page.

With help from your credit card counselor, you may be able to cut back on unnecessary expenses and increase your income enough to slowly pay down your debt over time. If necessary, the credit counselor can help you negotiate with your creditors to lower your interest rate or minimum payments. Creditors tend to be more flexible when the alternative is default. If you own a house, can you refinance for a lower interest rate? If not, it's better to sell the home than to risk foreclosure or bankruptcy.

Even if you feel like you're out of options, meet with a bankruptcy lawyer before filing with the court. The lawyer will consider your specific financial needs and determine if bankruptcy is indeed the best option.

Author's Note: 10 Pieces of Bankruptcy Information Everyone Should Know

Bankruptcy is one of those things that I hoped to remain ignorant about, like how to survive a plane crash or the best treatments for body lice. These are things you don't generally look into unless you have to. I am no financial wizard, but I am lucky to be married to a woman who knows enough about personal finance to populate a spreadsheet and maintain a frugal budget that usually keeps us in the black. I can't imagine the stress of being in serious debt and facing the prospect of bankruptcy. Researching the writing this article has opened my eyes to the complexity and calamity of bankruptcy and given me 10 more good reasons to thank my wife.

Related Articles


  • ACA International. "Year-Over-Year Bankruptcy Filings Decrease 16 Percent" (Sept. 19, 2014) http://www.acainternational.org/creditors-year-over-year-bankruptcy-filings-decrease-16-percent-33459.aspx
  • Bulkat, Baran. "Filing for Bankruptcy Without an Attorney" (Sept. 19, 2014) http://www.nolo.com/legal-encyclopedia/filing-bankruptcy-without-attorney.html
  • California Courts. "Bankruptcy" (Sept. 19, 2014) http://www.courts.ca.gov/1067.htm
  • Cauchon, Dennis. "Bankruptcy a reprieve for some companies." USA Today. Jan. 22, 2012 (Sept. 19, 2014) http://usatoday30.usatoday.com/money/companies/management/story/2012-01-22/bankruptcy-a-reprieve-for-some-companies/52745792/1
  • Dzikowski, Patricia. "Who does the bankruptcy trustee represent? Is she my friend or foe in the case?" (Sept. 19, 2014) http://www.nolo.com/legal-encyclopedia/who-bankruptcy-trustee-represent.html
  • FindLaw. "The Debt Discharge in Bankruptcy FAQ" (Sept. 19, 2014) http://bankruptcy.findlaw.com/chapter-7/the-debt-discharge-in-bankruptcy-faq.html
  • Harelik, Justin. "Debts that can't be wiped out in bankruptcy." Bankrate (Sept. 19, 2014) http://www.bankrate.com/finance/debt/debts-wiped-bankruptcy.aspx
  • Maidman, Bret A. "Chapter 11 Bankruptcy: An Overview" (Sept. 19, 2014) http://www.nolo.com/legal-encyclopedia/chapter-11-bankruptcy-overview.html
  • Michon, Kathleen. "How long will bankruptcy stay on my credit report?" (Sept. 19, 2014) http://www.nolo.com/legal-encyclopedia/bankruptcy-credit-faq-7.html
  • Nolo. "The Bankruptcy Means Test: Are You Eligible for Chapter 7 Bankruptcy?" (Sept. 19, 2014) http://www.nolo.com/legal-encyclopedia/chapter-7-bankruptcy-means-test-eligibility-29907.html
  • Nolo. "What is the difference between Chapter 7 and Chapter 13 bankruptcy? Which one lets me keep my property?" (Sept. 19, 2014) http://www.nolo.com/legal-encyclopedia/bankruptcy-faq-29047-2.html
  • U.S. Courts. "Bankruptcy Basics: Process" (Sept. 19, 2014) http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Process.aspx
  • U.S. Courts. "Chapter 7: Liquidation Under the Bankruptcy Code" (Sept. 19, 2014) http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter7.aspx
  • U.S. Courts. "Filing for Bankruptcy Without an Attorney" (Sept. 19, 2014) http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyResources/FilingBankruptcyWithoutAttorney.aspx
  • U.S. Courts. "Table F-2: U.S. Bankruptcy Courts – Business and Nonbusiness Cases Commenced by the Bankruptcy Court During the 12-Month Period Ending June 30, 2014" (Sept. 19, 2014)
  • http://www.uscourts.gov/uscourts/Statistics/BankruptcyStatistics/BankruptcyFilings/2014/0614_f2.pdf
  • Veiga, Alex. "Fewer Americans Fall Behind on Mortgage Payments." Associated Press. Feb. 12, 2014 (Sept. 19, 2014) http://realestate.aol.com/blog/2014/02/12/mortgage-delinquencies-fall-transunion/
  • Von Hoffman, Constantine. "Credit card debt up $28 billion in second quarter." CBS Money Watch. Sept. 11, 2014 (Sept. 19, 2014) http://www.cbsnews.com/news/credit-card-debt-up-28-billion-in-second-quarter/


How to Write a Check

How to Write a Check

HowStuffWorks helps you figure out how to write a check.