Bankruptcy is considered a "last resort" to debt problems because the consequences are severe. A bankruptcy stays on your credit report for 10 years and can drastically lower your credit score. Before considering bankruptcy, it may be to your advantage to contact your creditors directly and set up a debt-repayment plan. Perhaps staggering due dates for bills, utilities, or credit card payments may allow you enough flexibility to catch up. This step may better allow your cash flow to work for you rather than against you. You may also want to consider contacting a local nonprofit credit counseling agency for assistance. Most charge only a nominal fee for their services, and they may be able to negotiate some debt relief for you from your creditors. To find the name and location of a credit counseling agency in your area, visit www.nfcc.org. Also consider reaching out to local human services agencies. There are several national resources that might be able to assist you with managing your finances during times of financial distress. The HOPE NOW Alliance includes a number of credit counseling organizations that provide credit counseling, debt management, and foreclosure prevention counseling services. To find a HOPE NOW credit counselor in your area, see www.hopenow.com. Another national resource with local connections is 211. Either call this number or go to www.211.org. Individuals calling 211 are able to speak to a trained information and referral specialist to find out about specific community resources in their area. Another source of information about community services and public benefits is your local Family Services (also called Social Services) office. We would like your feedback on this Personal Finance Frequently Asked Question.

Browse related Faqs by tag: personal finance, financial crisis, personalfinance