Avoiding bankruptcy is now more important than ever. The law has changed and made it less advantageous to go bankrupt. The fact that a bankruptcy filing also stays on you credit record for up to ten years, and will make getting any future loans harder and more expensive make it even more important to avoid filling for bankruptcy.

Before I get into a few ways you can avoid bankruptcy, lets look at the different types of bankruptcies.

An individual can file for three different types of bankruptcies: A Chapter 7, Chapter 11, and a Chapter 13 bankruptcy.

Chapter 7 bankruptcy - This type of bankruptcy implies a liquidation of the assets of the person filing for bankruptcy. After the sale of assets is made, the amount is used to repay off the loans. In the event that not enough money is available to repay all of the debts, the remaining amount will be discharged and written off. You are not responsible for any amount that is not paid off.

The recent changes in the law have made it more difficult to file for Chapter 7. With the new law you cannot file for a Chapter 7 bankruptcy if you make more than the median income in your state.

Chapter 11 Bankruptcy - This type of a bankruptcy entails a restructuring and reorganization of the debt so that it can be paid back. This type of bankruptcy is usually used by people with large debt balances. Unlike a Chapter 7 bankruptcy, the debts are not discharged.

Chapter 13 Bankruptcy - This type of bankruptcy is very similar to a Chapter 11. It allows the filer to restructure and pay back the debt over a 3 to 5 year time span.

Here are a few of the steps you can take in order to avoid filing for bankruptcy:

• Spend less - Make a list of your monthly expenses and cut down on non-essential expenses and luxury items.  Set a budget an follow it.
  
• Sell some assets - Another option to consider is selling off some of your assets. Most likely you have a few thousand dollars worth of items around the house that you no longer need. Maybe jewelry, a junk car you might sell, collectible items, or other thing you might think of. eBay is a good place to sell some of your items.
  
• Pay off higher rate loans - Make a list of all your loans, the amount, and the interest rate. Start paying off higher interest rate loans first. When possible make a payment over the minimum amount due.
• Credit counseling - You should seek credit counseling to help you save and manage your finances. A credit counselor will work with you and your family to help you manage your debt. Also, the law requires you to seek credit counseling before filling for bankruptcy.
• Debt Consolidation - Another option is to take out a debt consolidation loan. With these types of loans you pay off all your other creditors and make only one monthly payment. Loan consolidation will usually result in a lower monthly payment and a longer repayment period. A consolidation loan carries a certain degree of risk because it uses you home as collateral.
  
• Debt settlement - A debt settlement can be considered one step short of a bankruptcy filling. With a debt settlement you, or someone on your behalf, negotiates with your creditors a reduction in the amount you owe. A debt settlement usually entails a 40% to 60% reduction in the amount you owe.

These are just a few a the thing you can do in avoiding bankruptcy. Obviously you are not limited to any one option and should consider following a few of the steps listed.

Here is more information that might be of interest to you:

• How to buy a car after bankruptcy
• Foreclosure prevention services
• Avoiding Debt Consolidation Scams
• Pros and cons of debt consolidation