Do whatever you can to avoid bankruptcy. You’ll extinguish your debts, sure, but your financial health will be damaged for some time. Not only is bankruptcy a humiliating and defeating experience, it’s an experience that will show up on your credit reports for 10 years after the fact. You might not be able to borrow a dime for years, and that’s not a fate you want to have — it’s good to have the option of borrowing money.
Before you get anywhere near filing for bankruptcy, you should at least seek out the assistance of a certified consumer credit counselor. Credit counselors will sit down with you, look at your situation, and attempt to work out a plan to get you out of debt. It may very well be the case that poor financial habits have gotten you into this mess, and only the guidance of a certified professional, who knows how to deal with debt, can get you out and teach you better financial skills for life in the process.
Credit counselors have relationships with creditors and therefore will be able to negotiate with them on your behalf, possibly lowering rates and monthly minimums in order to help you get out of debt.
That said, wherever there are people desperately deep in debt, there are vulture-like people trying to make a quick buck off of their anxiety. Use resources like the Justice Department’s list of approved credit counseling agencies to make sure you’re dealing with someone you know will act in your best interests. Generally speaking, be wary of those who advertise their services on the sides of buses and on daytime television — your desperation ought not be valuable to the person you’re seeking guidance from. Keep that in mind.
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