Nobody wants to file a bankruptcy; in the end it is a very difficult decision that is normally a last resort. There are some alternatives to consider first before you take that final step.

Take the time to list your expenses on a spread sheet or piece of paper. Make a budget that prioritizes your expenses, food, utilities, and mortgage first. Then if you have a car payment that should come next, once you have all your important expenses listed, begin to list your debt.

The purpose of this is to determine how much income you have available for debt repayment, and whether you can make progress with repaying debt. If your current income does not leave room for debt repayment or leaves you with getting behind on your credit cards it is time to consider your options.

Negotiate with Creditors – This will be your first step, not all creditors will negotiate with you, and many will not negotiate with you till you are two or more months behind, you will not know till you ask so do this first. Many creditors are willing to settle for the principle with a small amount of interest, simply to recoup the money they lent you. Often creditors will settle for 2-4% interest on a 2-5 year contract. Many credit card companies will not tell you about this till you are already delinquent so depending on where your finances are at, this may or may not do you any good.

Credit Counseling services – Debt repayment programs are not the same as credit counseling services and should not be mistaken for them. Often Debt repayment programs are nothing more than a scam, they entice you to sign a contract promising to reduce your payments when in fact many creditors will not work with them. Instead research carefully, check with the Better Business Bureau to find a Counseling agency that will work with you to create a payment plan you can afford. You can also go to www.usdoj.gov/ust which keeps a state by state list of US Trustee approved credit counseling agencies that you can contact.

Doing Nothing – This may seem like an unlikely alternative but more and more people are caught between a rock and a hard place and are choosing this option. Many cannot afford the costs of the new bankruptcy laws which have tripled the cost of a bankruptcy, require counseling at your expense, and can have a lengthy waiting period. If you are in a place of choosing between paying for food, heat, or housing and paying credit cards, it is pretty obvious what you should choose.

While nobody is telling you to irresponsibly choose not to pay the bills you incurred, we live in tough times and if you have little or no income coming in, you take care of basic necessities first.

If you live simply and are not extravagant, then your chances of being sued are very small, and what the creditors are able to take from you is limited, they cannot take the roof over your head, things you need to hold a job, clothing or any of the basic necessities of life. This will affect your credit rating but no more so than a bankruptcy, and if bankruptcy is not an option because of costs then this is an option you may have to consider.

Creditors and collection agencies are very limited in what they do in terms of harassment, so be sure to read up on your laws and let them know you know your rights.

Nobody wants to be in the position of not being able to pay their bills, with so much at stake such as our reputation and credit rating most of us would rather pay our bills then let them get behind. In the end though it is not the end of the world and you do have alternatives no matter where you are at in life. Knowing your alternatives and rights is the key to dealing with this situation, and certainly if you can pay, pay what you can but be sure to feed your family and keep your home warm, then and only then should you worry about the creditors.