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Probably the biggest and most obvious problem with filing bankruptcy is how it will affect your long term credit. A bankruptcy will likely show on a credit report for at least seven years and will make obtaining future loans and other forms of credit more challenging.

Unfortunately, credit is not the only consideration when filing bankruptcy. In fact, if an individual is already behind on payments, bankruptcy might not be that much to add to a credit report.

However, bankruptcy is becoming much more expensive with new laws in place and even much more difficult to be eligible for. What's more, many attorneys are too quick to advise clients to file. Why not? More business means more money for attorneys. So it is important to find a good attorney before filing bankruptcy.

Laws that came into being in 2005 are also causing more problems for potential filers. A credit counseling course is required within six months of filing bankruptcy even for people who have taken such courses previously or who feel that some of their debt problems are unfair or were caused by unforeseen events such as lost job, an injury or even temporary financial problems.

Bankruptcy also has a social stigma attached to it. And as a matter of public record, some people may believe that filing bankruptcy will make them notorious among their peers. Between the fear of social persecution and the high emotions that tend to run among people in difficult financial situations, a person facing bankruptcy may feel guilty or ashamed.

While it is unwise in any situation to make a decision based on emotions alone, the impact that it can have on relationships and self-esteem is something to think about.

Bankruptcy also costs money, even more so since stricter laws were passed in 2005. And there are also attorney's fees in addition to the filing fees. Bankruptcy doesn't always eliminate debt, either. Many people will be forced into filing a Chapter 13 bankruptcy where payments are required rather than filing a Chapter 7 simply because they make too much money, even if income seems very low.

However, bankruptcy laws were originally written to protect consumers. If a bankruptcy is really necessary, then it may not be the worst option. Nevertheless, bankruptcy should be avoided whenever possible.

Sometimes it is just as easy and much less expensive to communicate with creditors and work out payment options that are agreeable to both parties. This can help credit scores from being so damaged, as well.

If you have to file for bankruptcy, you need to understand that it can take several years to rebuild credit. Making consistent payments and carrying a little credit while paying regularly and time can help lessen the affects of a bankruptcy.

It still takes time to do and there are alternatives that should be considered before filing bankruptcy such as attempting to work out an agreement with lenders or working with a counselor to try and sort through financial issues.

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