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Bankruptcy should be your last resort, after you have exhausted all other options, including consolidation of debt, credit counseling, and credit negotiation. You can often reduce your debt to your creditors by simply talking to them. While lenders are understandably reluctant to reduce or relieve debt obligations, they realize that it is usually better to get something than nothing. As such, most lenders, and even the Internal Revenue Service, are willing to negotiate more lenient repayment terms provided that you can demonstrate the ability and willingness to repay them. It is always best to try this before declaring bankruptcy.
It is also possible, though difficult, to obtain a debt consolidation loan with bad credit. Again, lenders would rather see some money than no money at all, then they will work with you in order to help you pay your debts.
Sometimes, bankruptcy is the only option. Most consumers can apply for bankruptcy in two ways -using Chapter 7 of the Federal bankruptcy code, or Chapter 13. Chapter 7 demands that you surrender everything you own of value, and all debts, except child support, student loans and fines are completely eliminated.
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