The price for bankruptcy is very high these days. It's much more complicated, it takes a lot longer, and it costs a lot more than it used to. With the new bankruptcy laws in effect, you don't even get to choose which chapter under which you want to file. Instead, your finances are subject to a two-part means test. Based on many complicated criteria, the chapter under which you can file is determined by the court.

If you end up having to file under chapter 13, the court will apply living standards derived by the Internal Revenue Service (IRS) to determine what is reasonable to pay for housing, food and other living expenses and what they feel you have left over to pay your debts. The IRS standards are a lot more stringent than the old ones set by the bankruptcy courts. Contesting them will add much more time and expense because it will require a hearing from a judge, so it's best to just move forward rather than trying to contest the standards.

You have to meet with an approved credit counselor in your judicial district for a 90-minute session in the six months prior to applying for bankruptcy. And, you must attend money management classes at your expense before your debts are discharged. Go to http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm for the list of credit counseling agencies approved by the U.S. Department of Justice (USDOJ).

Under the new laws, if information about your case is found to be inaccurate, the bankruptcy attorney may have to pay heavy fines. As a result, it is much harder to find a bankruptcy attorney, and that attorney will be charging considerably more--fees could increase between 75 and 100%.

There are many other factors that complicate the filing of bankruptcy--too many to list in this article. You would have to speak with a qualified bankruptcy attorney to find out how the new law affects your case then determine if it's worth the cost and hassle. But, the damage doesn't end there.

Once you've file for bankruptcy, a chapter 7 bankruptcy remains on your credit report for 10 years and a chapter 13 remains for 7 years AFTER the debts have been paid. Considering the fact that many chapter 13 plans allow debtors 3 to 5 years to repay their debts, a chapter 13 could end up on your credit report for even longer than a chapter 7.

A bankruptcy on your credit report leads to increased interest rates, lower credit lines, being refused a loan and other credit issues, the possibility that companies will legally refuse to hire you, and the possibility that you may legally be denied insurance, as well as security clearance and licensing. On top of all that, the public records containing all of the personal information on your bankruptcy are kept in storage available for anyone for 20 years after it has been discharged or dismissed. This is why bankruptcy should be considered your absolute last option in resolving your financial problems.

There are other legal ways of getting out from under oppressing debts and stopping the creditor harassment. This page provides a few ideas that just may work for your situation.

Debt Relief /Debt Settlement /Debt Elimination Programs
Debt relief programs, offer the debtor a legal way to get out from under burdensome debt by means of debt negotiation, also known as debt settlement or debt elimination. Because these are considered hardship services, these programs typically require that you are suffering a legitimate financial hardship, be $5,000 or more in debt and that the debts are all unsecured. Unsecured debts include credit card debt (VISA, MasterCard, Discover cards), medical bills, service charges, personal loans, signature loans, store credit or charge accounts, gas charge accounts and certain installment loans. How these program work is that they demonstrate to creditors that you are willing to honor your debts, but due to your financial hardship you are unable to do so. This usually works in getting creditors to reduce your debt, sometimes up to 50%.

Why would creditors do this?
Creditors would rather take less than what you owe than risk losing the entire amount if you file for bankruptcy, which is what the negotiators tell them is the only other option. In short, creditors typically will negotiate because they would rather get part of what you owe them than nothing at all. Having an experienced and reputable negotiator working on your behalf will help you get your debt lowered as much as possible.

What is a financial hardship?
A financial hardship is any life event that has affected your finances to the degree that you are unable to pay your monthly bills. Some of the common hardships include:

• Loss of income
• Loss of employment
• Decreased income due to job change
• Divorce
• Medical issues

In addition to negotiating your debts with your creditors, these organizations will assist you by providing you with counseling and educational material on managing your finances.

If you are facing bankruptcy and you have at least $5,000 in unsecured debts, you may want to consider this option because you could potentially be debt free in as little as 24 to 36 months without having to secure a loan or declare bankruptcy. This does reflect on your credit report, but it is not as bad as having a bankruptcy because it shows that you have taken responsible and positive action in resolving your problems, which could reflect more favorably when you are back on your feet financially and looking to secure a loan. A bankruptcy lawyer may assist you personally or refer you to a non-profit organization that can help you.

Credit Counseling
Some organizations offer credit counseling and debt consolidation plans. These programs will help you reduce overall monthly debt, save on interest fees, help you to establish a monthly household budget, improve your credit rating by paying creditors in a timely fashion and end collection calls to your house. Usually upon entering a debt management or credit card consolidation program you would have to close your credit card debt accounts (as well as others).

Your "fixed monthly consolidated payment" is then calculated according to the lowest payment amount accepted by your creditors. The agency you through which you have secured the loan and hired to provide credit counseling services will distribute the amount of your "fixed monthly consolidated payment" to each creditor. Most creditors will only reduce or stop your interest fees if their minimum payment is met. However, the interest rate reduction with these programs can range from no change to the freezing of interest depending on the creditors policy. This can save you thousands because rates that are usually 12%-24% can get reduced to 10%, 8%, 6% or 0%. Sometimes, the agency may also be able to negotiate away late fees and back interest, as well. This can save you thousands of dollars.

Why would creditors be willing to do this?
The reason that creditors are willing to do this is simple; they know that if you are seeking credit counseling, you are taking responsible action to avoid filing bankruptcy. If you file bankruptcy, unsecured creditors often receive nothing, and they feel it is better to get a partial amount than nothing at all. Contact a bankruptcy lawyer to see if credit counseling could be a good option for you.

Debt Consolidation Loans
Debt consolidation loans can offer a debtor a fresh start on the road to more healthy personal finances. The advantages of a debt consolidation loan are that you may consolidate secured debts in addition to credit card debts and interest charges may be tax deductible (if the new loan is secured by a mortgage). However, if you have more unsecured debts than secured ones, you may want to consider credit counseling or debt elimination services because it is in your best interest to keep your unsecured debts unsecured rather than trading unsecured debts for secured ones. Most debt consolidation loans are secured by a mortgage or other collateral, making them secured debts.

What if I am facing foreclosure?
If you are facing foreclosure, you won't qualify for credit counseling or debt elimination programs because a real estate debt is considered a secured debt. However, you have several other debt workout options available to you including:

• Short Pay or Short Refinance: In most situations this is accomplished through a refinance. Example: The debtor owes $100,000 on their mortgage with another $15,000 in arrearage and legal fees. The loan is negotiated to be settled for $80,000 and a new $85,000 loan is made to cover paying off the original bank and all associated transaction fees. The debtor has now avoided the foreclosure and eliminated $30,000 of debt. Sometimes a friend, relative or investor buys or pays off the mortgage from the creditor at a discount.
• Modify the Existing Mortgage: In simple terms, the creditor, usually a bank, agrees to change the terms of the loan. Most often the changes are temporary. Reducing the interest rate, principal portions of payments, or extending the amortization in an effort to reduce overall payment obligations, remain the changes most acceptable to creditors. Unless the delinquency remains small with a loan at a local bank or the debtor has a nasty hardship under a government program this can be a tough plan to get through the creditor's guidelines.
• Repayment Plan: This is an easy to understand option that is also easy for the debtor to gain creditor acceptance. The debtor pays a portion of the arrearage and agrees to pay the rest in addition to the regular payment over a period of months. With proof of the income and the down payment most lenders will accept this type of plan all day if half of the arrearage plus their legal fees get paid up front with a promise to pay the rest of the arrearage in addition to the regular payment within six months. Plans with less down and paid over a longer period of time can be negotiated by our loss mitigation professionals.
• Forbearance: In exchange for money, a forbearance modification agreement or the debtor taking some other action (perhaps listing the property with a realtor or making repairs) the creditor agrees to temporarily cease legal actions.
• Deed in Lieu of Foreclosure: The debtor gives the property back to the creditor usually in exchange for their forgiveness of potential deficiencies.
• Short Sale: The property sells to a third party; the creditor forgives any deficiencies and accepts the sale price as full settlement of the debt. A deficiency is any money still owed after the sale of the property used to secure the loan. For example, if you borrowed $100,000 and the property sells for $90,000 there would be a $10,000 “deficiency” that you would still owe which the creditor decides to forgive, clearing the slate on the debt.
• Friendly Foreclosure: The creditor or a friendly third party that has bought the mortgage sells the property at foreclosure to clear the title of any other lien-holders. Later the property is sold back to the debtor or another predetermined entity.
• Repurchase after Foreclosure: Just as the name implies--the debtor buys back the foreclosed property after the auction.

Other options may be available. Contact your mortgage lender to find out what option best suits your needs.

When Bankruptcy Alternatives Just Will Not Work
You may have to go through the bankruptcy procedure, but be sure it's your absolute last option. It will be expensive and time-consuming. It will also be hard to find a lawyer. If you don't know a bankruptcy lawyer, you can look one up in the yellow pages or on the Internet at sites like http://findlaw.com or http://lawinfo.com.