When does a person know that bankruptcy is the only way out of a bad credit situation that is only getting worse?

Many experts believe that someone who can't reasonably expect to repay their short-term debt in 3-5 years should consider bankruptcy. Of course, a 30-year mortgage or a 10-year student loan shouldn't be included in that calculation. But if your credit card debt, auto loans, and/or other short-term debt is more than you can pay back (with a careful budget) in 3-5 years, bankruptcy may be the best option.

A good way to evaluate your credit situation is to pay a visit to a Consumer Credit Counseling Service. You can find an office near you by visiting the National Foundation for Consumer Credit Web site for a referral. Consumer Credit Counseling Service is usually free (or occasionally offered for low fees on a sliding scale), and they can help you assess your debt, create a budget, and develop a repayment plan. They will be unlikely to recommend bankruptcy (they are sponsored by credit grantors, who, naturally, would rather have consumer debts repaid), but in talking with them about your situation you will get a feel for how realistic a 3-5 year repayment plan is-or isn't-for you.