The financial crisis in general and the housing crisis more specifically have left thousands of families at risk for fining bankruptcy. Unemployment, inflation, higher mortgage payments and many other factors conspire to make the possibility of making ends meet a distant dream for many people. Faced with a home that is worth less than the mortgage, long term unemployment and mounting debt, many people feel their only option is to seek relief in bankruptcy.

Though bankruptcy laws are designed to offer relief to people in these situations, the process can be extremely detrimental to one’s credit worthiness for many years. It might help you make a fresh start, but that start could take years to realize. If at all possible, the answer is to avoid bankruptcy at all costs. There are several things that you can do to help you minimize your debts and get back on your feet without the prospect of 10 years of destroyed credit.

Since bankruptcy liquidates automatically many forms of unsecured debt, the lenders also prefer that you stay away from such proceedings. Credit card companies in particular are very willing to work with debtors so they can recoup at least a portion of what is owed to them. They will generally arrange a payment plan, often interest free, so you can discharge these debts without resorting to extreme measures.

Mortgage lenders are also very willing to work with you if it means that you will stay in your home and not resort to foreclosure. With so many foreclosed homes on the market, the chances of them regaining their loss are slim and they prefer a mortgage that is being paid, even if they have to renegotiate for less favorable terms.

One thing that people should keep in mind is not to wait until things are critical before taking action. The longer you wait to seek help from lenders and creditors, the less likely they will be able to help you, even if they would like to do so. As soon as you see that problems are on the horizon, begin taking to your creditors and try to secure any benefits you can. If you present them with a viable plan for repayment, they will be that much more likely to offer you something in return.

Though bankruptcy can at times seem like the only option, it is hardly ever the best thing to do. It is expensive in terms of attorney fees and other expenses and will not necessarily free you from your debt obligations. It will leave a black mark on your credit record for 10 years and make it very difficult to buy a home or take out any kind of loan. Before resorting to this option, explore the other sources of help available to you as soon as possible. In most cases you will be able to avoid bankruptcy by acting quickly.