Bankruptcy is a last resort. Explore non-bankruptcy alternatives first. It's easier if you create a budget for your realistic, monthly expenditures for current living than if a court does.

Bankruptcy Rule of Thumb
If the money available each month after you pay your current living expenses, is enough to pay off your existing debts in three years, you can get along without bankruptcy. If not, look for ways to reduce expenses, increase income, or sell assets to make that possible before choosing bankruptcy. If you can't pay off your debt within three years on the present terms, try a credit counselor. They can help you make a budget and negotiate a repayment plan that may include a reduced interest rate on your existing debt.

When Bankruptcy Has A Chance To Help
There is no magic formula for determining whether bankruptcy is the best choice for you. Consider these factors that might make bankruptcy a good choice

• the older you are, the less damage bankruptcy will cause
• the more people dependent on your income, the more stress bankruptcy can ease
• the larger your debt, the more creditors will be covered with bankruptcy proceedings
• the smaller your cash reserves or retirement savings, the larger your potential debt relief
• the greater amount of non-dischargeable debt, the better bankruptcy will work

However, if you have nothing that a creditor could take from you (that is, nothing that could be repossessed), there is no reason to seek bankruptcy protection now.

Bankruptcy Costs
Bankruptcy court filing fees are standard nationwide. The filing fee for a Chapter 7 bankruptcy is $299. The filing fee for a Chapter 13 bankruptcy is $274. A $15 fee applies if you convert from a Chapter 13 bankruptcy to a Chapter 7 bankruptcy. Finally, a $26 amendment fee applies for every change you make after the initial filing. Attorneys' fees vary depending on location and complexity.

In a Chapter 13 bankruptcy, debtors usually pay a portion of the attorney's fees and the entire filing fee before filing. The balance of the fees becomes part of the discharged debt and is paid from the monthly payments that the debtor makes to the trustee.

If you are deep enough in debt to consider bankruptcy, you probably don't have the cash on hand to file for bankruptcy. If you are considering stopping credit payments and saving the payments so you can file for bankruptcy, weigh the consequences. If you stop payments, a creditor can take action against you, but it usually takes weeks or months for a creditor to get a judgment that permits them to seize your property or your wages. Most creditors rely on nasty letters and harassing phone calls for a long while before suing. This gives you time to save money to pay for bankruptcy.