The idea behind bankruptcy law is to provide a solution for those who are looking for a fresh financial start. There are many ways to determine when to claim bankruptcy, such as personal consultations with your financial adviser and debt calculator tools. In order to begin the process of claiming bankruptcy, you first need to file a petition, which includes a statement of your assets and liabilities. Another way to look at your liabilities is the amount of money you owe to creditors for items like your car, your home or personal lines of credit.

The property that can be seized during a bankruptcy proceeding is different depending upon the laws in your state, so it’s important to check under your specific location. Apart from the differences in what can be seized, there are some states that allow federal instead of state exemption. Before making the decision to claim bankruptcy, it’s a good idea to review the alternatives to filing, which are summarized below.

1.    Debt Workout Program - A debt workout program is an agreement between the borrower and lender that can allow the lender to become current on their debt obligations. Some of the possible workarounds include a temporary reduction of your interest rate, a reduction or elimination of payments, incorporation of missed payments into your total balance and an extension of loan terms. In order to best position yourself for a debt workout you should contact the lender as soon as you foresee trouble with your finances.

2.    Setting up a Deed in Lieu of Foreclosure – This process applies to a home that you own, and involves you giving the bank the keys to your home, which in turn allows you to walk away from the debt that you owe the lender.  This procedure is often the best option for people that are no longer interested in keeping their homes, or for those that simply have no other options.

3.    Debt Consolidation Loan – Advertisements for these types of loans are common, which might make you believe that they are the perfect solution to avoid filing bankruptcy. Essentially, a debt consolidation is the process of consolidating payments and bills into a single payment under a debt management or credit counseling program.  The resulting single payment is often much lower than the combined payments before the process. Consolidation loans can be somewhat risky, particularly since it relieves the burden from the troubled borrower, which may allow them to more easily slip back into debt. These types of loans can also be more expensive over the long term, since the loan payback period is usually extended beyond where it was before the consolidation.

Hopefully the information provided above will give you the information you need to determine whether filing for bankruptcy is the right decision for you. Obviously, before looking at how to claim bankruptcy, it’s critical for you to meet with a qualified bankruptcy attorney or a bankruptcy service agency. There are a number of bankruptcy attorneys that will automatically place their clients into the process of bankruptcy regardless of the available alternatives. It’s important that you avoid these types of attorneys in lieu of those that are willing to explain more than just how to go bankrupt. Although there are a number of different scenarios that can help you to avoid a bankruptcy claim, it’s important that you seek the advice of an experienced professional attorney before making any decisions that could affect your personal and financial future.