Filing bankruptcy is a common practice among the U.S. Over 2 million people file for bankruptcy every year. So many families today are swimming in debt, which is not surprising with the amount of credit that is being offered. If you pay your bills, you're given the opportunity to run up more bills. For young people, this is often too much responsibility to handle. Many people choose bankruptcy in order to gain a fresh start.

However, bankruptcy leaves you with a bad record. This makes it harder to buy a house, a car, or any other big-ticket item soon after you have filed for bankruptcy. Mortgage lenders will certainly be more cautious before granting a loan to someone with a history of bankruptcy.

Luckily, there are other choices.

It seems like every other TV commercial is talking about debt consolidation. Why? Well, it's a big market and many people are opting for debt consolidation before taking the plunge into bankruptcy. Before you decide to take this route, you must ask yourself: Will I be able to pay all of my other bills on time and still be able to survive monthly? Failing to pay a debt consolidation loan could cause you to lose your home to a creditor. So, before you decide to consolidate your debt, make sure you can handle the payments. Know all of the facts.

Quick Tip... Shop around for a loan consolidation company. Compare interest rates and company reputation. Get as much information as you can about each potential company so that you will receive the most manageable payment.

Another option is to make a settlement. If possible, it is best to try and pay off your debt in full or to make an arrangement for payments with the creditor. Do not borrow money to pay off your debts. For most people, this only leads them deeper into debt.

Credit counseling agencies will contact your creditors and make new payment arrangements on your behalf. Most of them are able to get your interest rate lowered or even have your interest payments stopped.

Some families have found credit counseling to be one of the best solutions for avoiding bankruptcy. It will also give you some breathing room, without creditors calling you off the hook.

However, sometimes bankruptcy is the only option. Personal bankruptcy allows people with overwhelming debt to get a fresh start. Although it will tarnish your credit rating, bankruptcy is sometimes the only choice. In this case, it is important to find a good debt settlement company. As always, researching different bankruptcy companies and options is the best thing you can do.