Here’s some breaking news: The number of new consumer bankruptcy filings are 14% lower than they were the first half of 2011. That’s some great news. Or is it? Let’s look at what may be behind this drop. Some experts believe the lower bankruptcy rates are due to the low interest rates. But I can’t think of a single client who is behind on his/her debts who isn’t getting hit with double digit interest rates. Some are even hovering at the tippy-top of the scale at 26%-29% interest.

So I don’t think low interest rates are the real reason bankruptcy rates are lower. Here’s my take on the situation. I think one of two things is happening right now:

1. A tremendous number of people simply can’t go bankrupt even though they would desperately benefit from it – because they can’t afford the bankruptcy fees. There are even attorneys out there who “help” their clients out by holding title to their cars while they pay off their bankruptcy fees. The drawback of course is that if yet another financial calamity hits.. now they lose their wheels as well! (For many others, this isn’t even an option because they’re going bankrupt on their car loans and don’t even have title to their cars!)

2. A growing number of people are looking to debt negotiation as a “non-bankruptcy” option. This might work best for you if you’ve come into some money, from a tax refund, a small inheritance, a second job, sale of some fun items like your ATV or weightlifting equipment, or just super cutting of expenses (especially if you’ve already lost your home to foreclosure and moved in with friends or relatives). Also, with our sandwich generation growing, many people in their 40’s-50’s have put their names on property that’s owned by their folks. Going bankrupt could cause creditors to come after mom and pop’s accounts or real estate – so that option is completely off the table.

If your debts are more than 1/3 of your income, it might be time to start looking at what options you have for getting out from under them. FIRST and foremost, do NOT borrow more money from any family members or friends and SECOND, do NOT tap into your retirement savings – these are usually exempt under a bankruptcy. Check with a qualified bankruptcy attorney in your area (there’s a free referral listing of consumer bankruptcy attorneys by state on my website, to see if that’s your best option. Or call my office for a free 15 minute consultation to talk through what’s going on in your finances. You may just need a better way to structure your income and payments so you can get back on track. You’d be surprised what you can accomplish with just a little clarity. And the best strategy for you might not even cost you any money – just some time creating a system for yourself that puts YOU back in charge of your finances.