Is your debt more than you can pay? Have you considered filing for bankruptcy, or talked with a financial adviser who has suggested bankruptcy filing? If you find yourself in over your head in debt, bankruptcy might appear to be the perfect solution – but only if you've considered all other alternatives first.

In fact, taking a close look at bankruptcy alternatives might make you think twice about filing bankruptcy. Bankruptcy should be used as a last resort as it can be extremely frustrating, and it creates long term damages on your credit. Plus- even though you are filing bankruptcy to get out of debt problems, bankruptcy is not free. You will need an attorney and they will require an upfront payment before proceeding. Depending on where you live, filing bankruptcy can cost anywhere between $500 and $1,500.

You will also need to consider whether or not your debts are the type that can be removed in a bankruptcy. Not all debts can be wiped out by filing bankruptcy. Child support, student loans, alimony and taxes are all debts that must be repaid, and can't be removed from your responsibility through filing bankruptcy.

If you do file bankruptcy, it will stay on your credit history for ten years. Having a bankruptcy on your credit report will make it difficult if not impossible to get loans or credit cards – and any financing you are able to obtain will have extremely high interest rates because you are classified as high risk. In essence bankruptcy should be considered to be a 10 year sentence – and if you could reasonably pay off your debts within 10 years you may want to consider paying them off instead of filing and then dealing with the repercussions of it later on.

Bankruptcy Alternatives

Before filing bankruptcy, you should first try to negotiate settlements with your creditors. A debt settlement is when a creditor agrees to accept less than the total amount owed and consider the account paid in full. It is often marked as “settled” on your credit report which is not as good as “paid as agreed” but it is certainly better than filing bankruptcy. What you need is time to get back on your financial feet and that is what a settlement process will provide you.

Your final alternative to bankruptcy involve making a detailed, strict budget in which you will have to live. It would be a new way of life, most likely, and involve reducing your expenses to the bare minimum (perhaps moving to a less expensive home, skipping cable television and all unnecessary expenses, reducing utility usage, etc). It would involve increasing your income by getting a new job or a second or even third job in order to get more money to pay off debts.

Think of it this way – you could file for bankruptcy and have financial troubles for 10 years afterwards; or you could get serious about paying off debts and build your credit score and history while repaying in half the time.