When in the unfortunate position of having too much month left on the end of the money, most consumers start thinking in terms of bankruptcy. Based on common wisdom, many people assume that bankruptcy is their only option and that it will simply wipe out their bills so they can start over.

This is very inaccurate, especially the “simple” part. Bankruptcy is far from simple. Yes, there are various types of do-it-yourself kits on the market that supposedly show you how to file bankruptcy from the comfort of your kitchen table, but what they don’t tell you is that you don’t know how to file bankruptcy correctly. to retain as much of your assets as possible, and that you may not even be approved to file.

Yes, you read that right – with recent major changes in bankruptcy law, you now need to get approved to file, it’s no longer automatic like it was just a few years ago. There are now many more restrictions on when you can file for bankruptcy and even IF you can. One of the reasons it takes so long is that each case is evaluated individually, as everyone has a unique situation.

It is interesting to note that studies have shown that the vast majority of people who file a return do NOT do so because of financial mismanagement issues. Sure there are some of those, inevitably, but most people who apply do so due to a drastic change in their financial circumstances, such as a job layoff, a very messy divorce, unexpected high medical bills, and various other things that they can rarely be foreseen and planned.

If you are thinking about bankruptcy, take a step back and take stock of where you are right now. Bankruptcy MAY be your best option, but it is not always your best option and it is almost certainly not your only option. Keep in mind that bankruptcy has some long-term negatives that should be avoided if possible, such as the fact that bankruptcy will be a huge red flag on your credit report for the next 7-10 years.

Get copies of your credit report and find out what the credit bureaus think of you. Studies have shown that most consumer credit reports have errors, and these errors will never be corrected unless you take the time and effort to point out the error to the bureaus. This step in itself could boost your credit score and make you eligible for much more attractive interest rates on loans and refinancing options.

You may want to consider debt consolidation. This is where you turn your bills over to a debt consolidation agency that will negotiate with your creditors to waive late fees and lower your interest rates. For example, if you used to pay $3,000 per month, you might find that you now only pay $1,500 per month with the help of a debt consolidation company. Please note that this is not a loan, so you must keep up with your payments to the agency.

Meet with a good bankruptcy attorney to discuss your situation. If you go ahead with filing for bankruptcy, you will most likely save much more than the attorney’s fees in terms of overall savings. These are people who understand the law and can recommend your best course of action based on your financial circumstances.

Don’t be in a rush to file for bankruptcy. You’ll be much further ahead to thoroughly examine all of your options and alternatives, especially for something like bankruptcy that will stay with you for many years to come.