Bankruptcy regulations have transformed somewhat a bit over the last ten years. At one time, if you had debt difficulties, bankruptcy was a reliable way to rid yourself of a lot of of your financial obligations and begin a new life. And then, in the early part of the new century, Congress passed a new bankruptcy law. Going into effect in October of 2005, it represented the most significant overhaul of the United State's bankruptcy laws in over forty years.

In the old days, under the old bankruptcy legislation, the odds were in your favor. As a debtor, you had a good chance of ridding yourself of your most onerous debts. As a result, odds were that you would be able to get back on your feet. The new law, however, is weighted much more towards giving the creditors a break and is meant to discourage bankruptcy filings by making them tougher to get. It is also meant to make sure that you will not be able to write off some of your debts at all.

In this year alone, substantially more than a million individuals will go to the courts and make a bankruptcy filing. Deciding to file for bankruptcy has never been an easy decision but the changes in the law make it more important than ever that you first look for viable alternatives before you file for bankruptcy.

Bargaining for A Settlement Agreement

You you should not want to file for bankruptcy if you can possibly help it. So, before going down that rout, see if you can work out a negotiated settlement with the creditors to whom you owe the most. This could very well be a win/win for your both. In addition these types of settlements can be very flexible. It is true that, as a rule, creditors do not like doing this. But, they also realize that this solution is a lot better than taking you to court with the risk of coming up empty handed.

The most widely used kind is where the creditor will agree to write off a substantial part of what you owe in return for a lump sum payment of a considerably smaller amount. Why would a creditor do this? In many cases it's simple economics. Lenders already have overhead built into the loan. They have already recouped all or most of their expenses through what you've already paid. The agreed upon lump sum will be designed to make up for the rest.

Another common type of negotiated settlement is one where the debt is not lowered but merely postponed. This is great if, for example, you've had a hard time finding a job with enough income to support you but you are expecting job market conditions to change in the near future. In this case, you may be able to convince the creditor to let you "skip" a few month's payments until you get back on your feet.

In the event you satisfy specific conditions, several credit card providers will probably be ready to do this with what's known as "re-aging". In essence, they will bring your account up to date so you are no longer in arrears. The amount you owe may or may not be changed, depending on their policies. In some cases, it remains the same but the loan is simply extended. For example, if your last payment was due on March 2, 2009 and you receive a three month re-age, your last payment would be changed to come due on June 2, 2009.

The Appeal Of Debt Consolidation

The do away with your credit card debt trend these days, at least if you watch early morning television is debt consolidation. It is often held up as the perfect way of avoiding filing for bankruptcy. But debt consolidation does not typically reduce the amount you owe, it simply consolidates your debts into one payment. In addition, many debt consolidation services come with non-refundable upfront fees and other unnecessary "debt educational services" which rather than decreasing your debt load, increase it.

It's unfortunate, due to the latest bankruptcy laws, you don't have the number of options as you once did. Therefore, it is more important than ever to seriously seek other solutions before making your filing.