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Debt Management Guide 2008
Bad credit
Bad credit can hurt a consumer in many ways. Understand how debt negotiation and bankruptcy work.
Bad credit
Can bankruptcy help you?
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Avoiding bankruptcy
When it comes to your finances, ignorance is definitely not bliss. If you're in financial trouble, it's better to face it, even if that means thinking about the possibility of bankruptcy, and start investigating the options early. Sometimes that little bit of foresight can enable you to avoid bankruptcy.

"The difficulty so many consumers have is by the time they are taking action to fix their problem, the only option is bankruptcy," says Nick Jacobs, spokesman for the National Foundation for Credit Counseling, an umbrella group of local nonprofit credit counseling agencies.

So stop avoiding the mailbox, open those bills and take a realistic look at your finances.

Don't be afraid to take a closer look at the situations that got you into money trouble -- especially if you believe you've been taken advantage of financially.

"Many people who are going through bankruptcy are those who got into abusive home loans," says Sherry. When the legal remedies don't work, they resort to bankruptcy. "Look at what consumer protection laws might be invoked."

One place to find a consumer attorney who can help is the National Association of Consumer Advocates, which has more than 1,000 attorneys representing consumers victimized by fraudulent, abusive and predatory lending policies. Most important, find out where you are financially, get some good advice and create a financial plan for where you want to be. Take control of your finances and try to keep your sense of humor, too.

Says Garkey, "Even if you've had years of bad credit, it's never too late to start."

-- Updated: June 16, 2008
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