Bills, creditors, debt collectors. Are you yearning for the days when all you had to worry about was the money in your piggy bank? If so, you are far from alone. Whether its illness, loss of a job, or simple overspending, it happens to the best of us. But that doesn't mean your financial situation needs to go from bad to worse.

Developing A Budget: Start by doing a realistic assessment of how much money comes in and how much your spend. List income sources, “fixed” expenses (mortgage or rent, car, insurance) and expenses that vary (entertainment, clothing, recreation). Don't leave anything out, no matter how trivial it seems.

Obviously, the necessities are your first priority. Then you can prioritize the rest. The bottom line Is, that unless there's money to cover, you're going to have to cut back on spending.

Contacting Your Creditors: Many creditors will work with you if you let them know you are having trouble making ends meet. Tell them why it's difficult for you and try to work out a modified payment plan that reduces your payments to a more manageable level. Don't let them give up on you – get to them before they resort to collection agency action.

Dealing With Debt Collectors: Nobody wants to deal with the bill collector – least of all you! But, should it happen, be sure you know the rules. The Fair Debt Collection Practices Act is the law that dictates how and when a debt collector may contact you ...

A debt collector may not call you before 8a.m. or after 9p.m ... or at work if the collector knows that your employer doesn't approve of the calls. Collectors may not harass you, make false statements, or use unfair practices when they try to collect a debt.

Bankruptcy: Personal bankruptcy is generally considered the debt management tool of last resort because the results are long-lasting and far-reaching. A bankruptcy stays on your credit report for 10 years, making it difficult to acquire credit, buy a home, get life insurance or sometimes even get a job. Learn more about bankruptcy

On the other hand, bankruptcy is a legal procedure that offers a fresh start for people who can't satisfy their debts. Individuals who follow the bankruptcy rules receive a discharge or court order that says they do not have to repay certain debts. There are two primary types of personal bankruptcy:

Chapter 13 bankruptcy allows you, if you have a regular income and unlimited debt, to keep property, such as a mortgaged house or car, that you otherwise might lose. In chapter 13, the court approves a repayment plan that allows you to pay off a default during a period of three to five years, rather than surrender any property.

Chapter 7 bankruptcy known as straight bankruptcy, involves liquidating all assets that are not exempt. Exempt property may include cars, work-related tools and basic household furnishings. Some property may be sold by a court-appointed official (trustee) or turned over to creditors.

NOTE: You can receive a discharge of your debts under Chapter 7 bankruptcy only once every six years.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments utility shut-offs and debt collection activities. Both also provide exemptions that allow you to keep certain assets, although exemption amounts vary.

Personal bankruptcy usually does not erase child support, alimony, fines, taxes and some student obligations. Also, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy does not allow you to keep property when your creditor has an unpaid mortgage or lien on it.

Being burdened by debt is overwhelming and puts you into a position of great vulnerability. And, clearly, yielding to bankruptcy is an extreme measure that requires a great deal of thought. In the last few years, a record number of consumers have been filing for bankruptcy.