Bankruptcy is generally considered to be a last option. But trying too hard to avoid bankruptcy can hurt you.
I signed up a client yesterday who had been going through financial problems for months. He wanted to avoid bankruptcy and thought he could get through the debt problems on his own. I believe that people are generally good. They try to meet their commitments and pay their debts. This gentlemen fell into that category. He was visibly distraught about it coming to the point of bankruptcy and he had been avoiding it at all cost over the previous months.
About six months ago, he took out a second mortgage to get equity out of his home in order to pay off about $20k in credit card debt. But, that was not enough to get him back on his feet, so here we are now filing his bankruptcy. The problem is that the $20k that used to be equity in his home, would have been exempt property that he got to keep. And, the $20k that was credit card debt, would have been unsecured debt 100% discharged in his chapter seven bankruptcy. Long story short, that action to avoid bankruptcy, didn’t. And, it did cost him $20k in equity that he could have kept in his home.
So, if you are having debt concerns, even if you are trying to avoid bankruptcy, talk to an attorney now about the possible consequences of the choices you are making now. Be smart about avoiding bankruptcy and be smart about filing bankruptcy.