An average of 1 million people file for non-business bankruptcy each year, according to U.S. court data going back a decade. 
While bankruptcy is often portrayed as a quick decision made in earnest for those who just can’t seem to dig themselves out of debt, that’s a dangerous conjecture — bankruptcy is a legal safeguard.
It’s considered a last resort, sure, but that doesn’t mean it’s an action haphazardly or imprudently made. Bankruptcy takes time and effort — the process itself can take six months, and the decision to get to that point should take at least as long. Here’s how to determine if you should consider it.
Take a serious look at where you stand financially. Look at your debts owed, your income, your assets and the likelihood of your financial situation changing drastically over the next months or year. Be harshly realistic about the practicality of digging yourself out of debt.
It’s best to follow a simple two-step process. First, track all overdue bills and project all future bills. After that, compare all assets to this amount and see if liabilities outweigh this number.
Regardless of how far you are in debt, it is important to fully grasp where you stand financially. Your financial situation is your own, and you are in control. It is up to you to take responsibility for the actions made that got you into the current situation, just as it is your responsibility to take control of the actions you will make to rectify the situation.
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Understand Your Assets And Consider Consolidation
Bankruptcy doesn’t just erase all debts without consequence. By filing a chapter 7 bankruptcy, the court takes on your debts and property. The consequence? It can liquidate your assets to repay the debts you owe.
Therefore, if you know you’ll likely be filing a chapter 7, it’s best to consolidate any debts that are secured. Secured loans are loans that use the item purchased (such as a home or car) as collateral for the debt; if the debt goes unpaid, the item can be reclaimed. If you’re in this situation, it makes sense to take out a personal loan, pay off the secured loans and eliminate that lender’s claim on your property.
Think About The Timeframe
A major word of caution: If you open lines of credit 70 to 90 days before filing bankruptcy, it can be deemed as fraud. That action can signal to creditors that you have no intention of paying the newest loans back at all.
Therefore, if you wish to consider consolidation through a new line of credit, seek advisement from a personal financial advisor or lawyer in order to minimize the risk of having your actions deemed “preferential transfers.”
Also keep in mind: These practices are not the same you’d use if you’re undergoing bankruptcy. If that’s the case, the strategy used to handle auto loans and mortgages changes. Under chapter 7, for example, you can reaffirm the debt, redeem the purchase or surrender the item.
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Solicit Help, Guidance And Assistance
Declaring bankruptcy is not something you should attempt alone. Regardless of how well-versed you may be in the legalese of bankruptcy and financing, you should reach out to someone outside of the situation – a financial advisor, lawyer or credit counselor – and lean on their expertise.
Financial pundit Dave Ramsey is known for having said, “There are no shortcuts when it comes to getting out of debt.”  Being in the depths of debt can muddle even the most clear-headed individual’s thought process, and enacting a plan of action needs to be meticulously detailed and precisely followed.
Repeat: Don’t try to handle this alone.