If you have uncontrollable debt as a result of credit cards or other secured (with the exception of your mortgage) and unsecured (with the exception of your student loans) loans, bankruptcy is a possible option. Bankruptcy is an extreme financial measure that will wipe out most of your debts and give you a "fresh start," but as payment for this "fresh start" your credit score will be destroyed. As such, you should try to recognize the warning signs of bankruptcy in order to attempt to avoid obtaining the same.

Obtaining a bankruptcy is probably the worst one time action that you could do to your credit report and your credit score. Obtaining a bankruptcy not only crushes your credit score, but will keep it that way for up to ten years. As such, should you want to obtain a credit card or a loan of any kind, it will be very hard for you to be able to do so. As such, it is important to consider whether obtaining a bankruptcy is worth this disadvantage.

Another disadvantage of bankruptcy is that it is a legal proceeding. Thus, you may have to obtain the services of an attorney is order to file a bankruptcy and to proceed with the process of bankruptcy. I am not going to pretend to be an expert in bankruptcy. Therefore, if you choose this option, go see a qualified attorney. What I can tell you is that filing for bankruptcy will cost you several thousand dollars. However, if the attorney fees for bankruptcy are less than the interest fees you would have paid over the life of the debt (assuming the outstanding debt is large enough), bankruptcy may be a good choice. That being said, because of the damage to your credit, bankruptcy should always be your absolute last resort.

Basically, you have to make a decision. Should you have insurmountable debt and have absolutely no way to pay it off, bankruptcy may be a good option for you. Additionally, should your debts be affecting your mental and physical health due to heightened stress levels, bankruptcy may be a good option for you. Remember that if you have nonexempt assets (assets that are not exempt from being sold to satisfy your outstanding debts), you may be required to sell these assets in order to pay off your debts. Therefore, should you have three cars and other luxury items, you may have to sell some of these things. Thus, this factor should be considered before filing for bankruptcy.

Bankruptcy is a double edged sword. Even though most of your debt is discharged and you receive a "fresh start," such a "fresh start" will cost you several thousand dollars and destroy your credit score. Therefore, carefully analyze your situation and see if bankruptcy is a good option for you.