Is bankruptcy the best solution for insolvency?

You are wise to consider bankruptcy as an option early on. Planning ahead and thinking about the reality of bankruptcy before you're really behind on debt makes all the difference in the world with regards to the assets you will protect and the options you have.

If you have become insolvent, or will be, then the first thing to do is a reality check. How likely are you to find a job within two months that paid as well as your previous one? How likely is it for your wife?

Many people make the unfortunate, albeit honest, mistake of burning through all possible assets like retirement accounts to repay as much debt as they can and avoid bankruptcy. While this is an honorable effort, it's a poor financial decision.

The reason is, these same people often end up filing bankruptcy later, only to have no assets left to protect. Bankruptcy is designed to offer debtors who have become insolvent protection from creditors. The most important thing to know is to leave your assets and property alone. many of these accounts and assets will be protected by the bankruptcy courts, and creditors will be barred from going after you.

A good piece of advice is to attend pre-bankruptcy counseling early on. It only takes an hour or two, and even if you do not file bankruptcy, you will learn all of your legal rights under federal and state bankruptcy laws.