Bankruptcy is a serious decision and has serious ramifications, so make sure you only file for protection as a last recourse. When things seem to be at their worst it may seem like an appetizing solution, but often, it is not the best course of action. When you file for bankruptcy protection, it stays on your record for seven years, so if you think it will take you less than seven years to pay off your debt, try to do so without filing. You might now be wondering what is the best way to avoid bankruptcy. Here are some excellent tips for deciding whether filing for bankruptcy is right for you.

One of the best options is to refinance your debt into a different payment structure. This type of reorganization is called debt consolidation. When you consolidate your debt, you change it from many separate loans into one single loan, in which property is usually used as collateral. This type of reoganization is useful because it replaces many high interest rates with a single lower interest rate, saving you a lot of money in the long term.

If the debt is bad, liquidating some assets can help in a pinch. With the advent of the internet and other forms of mass communications, it is definitely possible to sell a few items to generate some cash in the short term. Go through your house and assess what you need and what you could live without. It might not be pleasant to sell the items that you purchased which got you into debt, but it may be a viable option to owing a vast sum of money to creditors. If things get really bad, you could sell some larger-ticket items like cars or boats, and at its worst, moving into a smaller house might be preferrable to bankruptcy.

Ask for more hours at work, and see what other members of the household can contribute to the family’s welfare. Ask for a raise at your current job or consider taking on part time freelance work if you have a skillset.. Even with the current environment, asking for a raise can’t hurt when facing bankruptcy. If your significant other doesn’t work, perhaps its time that they go out and pursue a career or at least find some part time work while things get better economically.

Be honest to your lenders, and if things are getting difficult, talk to them about restructuring. Tell them about your situation and that without some relief, bankruptcy is a real possibility for you. Banks don’t want their clients to be unable to pay, so they may be willing to reduce some of your debt or reduce the rates you pay on your loan in order to accomodate your situation. Be upfront with your information and ask if they have any way of helping you pay the loan. Even if they offer assistance, make sure that you read the small print on the contract, as they may agree to offer assistance in the short term, and raise your rates astronomically down the road.

Do the research about the regulations and laws of your locality. States have varying bankruptcy laws, so its in your interest to be familiar with them. By understanding the laws, you given yourself a valuable advantage when it comes to deciding your own fate in the bankruptcy process. Some states can even rule that you are bankrupt without you even being present or knowing of your situation. Even if you have to find a lawyer who is willing to work “pro bono,” do everything you can to obtain legal representation and advice. Its worth it in the end.