If you are considering bankruptcy, your financial situation may be causing you a great deal of stress. However, before you decide to pursue bankruptcy, there are some things you need to keep in mind. You may be able to avoid this drastic decision all together or make the process easier on yourself.

Try Talking to Your Creditors

You may be avoiding calls from companies you owe money to, but this can be a mistake. Many companies have programs in place for those who are in dire financial straits. Talk to them about setting up a payment plan and inquire about any financial hardship options that may be available. With a simple phone conversation, you may be able to make arrangements that help you avoid filing for bankruptcy.

Avoid Using Your Retirement Account

You may be tempted to use money in your retirement account to pay down debts. However, this is not always a good idea. You may discover that you still need to file for bankruptcy, and what's more, you are responsible for the penalties and fees associated with prematurely using money from your retirement account. Leave your retirement account alone when considering bankruptcy issues.

Know What Cannot Be Discharged

You're probably at the end of your financial rope, but it is important to realize that not all of your debts can be discharged in a bankruptcy. For example, many student loans must be repaid whether you file for bankruptcy or not. It is important to talk to a lawyer to determine which of your debts you will still be responsible for after a bankruptcy is processed. You may have to make other arrangements to settle debts that cannot be discharged.

Don't Repay Family Members and Friends

If you do have some extra money, you might decide to pay back relatives, friends, and others close to you who have lent you money. However, if you do ultimately file for bankruptcy later, the trustee put in charge of your case may very well require that money to be put back into your account so that corporate creditors are paid. Therefore, if you are trying to repay debts, focus on companies first.

Now that you know some things you can do to improve your financial situation, use the tips above to help you set your finances in order. If you still want to file for bankruptcy, consult a bankruptcy attorney who specializes in this area and can provide the guidance you need at this time.