With a credit crunch and mortgage delinquency increasing, many families are considering something they never have before: bankruptcy.
Bankruptcy filings in Washington state are up 40 percent from last year.
"Since the first of the year, they've risen from around 46 filings a business day to about 77 filings a business day," said Mike Bickford with AACER, an Oklahoma City firm which tracks bankruptcy filings. "In the month of November, they were, on a daily filing basis, higher than any month since the bankruptcy laws changed in October 2005."
Bickford says the trend looks to continue. "When you look at your average filing increase in 2008 over 2007, Washington ranks 12th highest in that increase." That's compared to 27th in the nation last year.
Despite the numbers and the rumors, filing for bankruptcy might not be that bad.
"It's really not the killer that people think it is," said Bill Harrington with radiocredittips.com "If you want to buy a home, some lenders will reject you because of the bankruptcy, however the flip side is because lending is so competitive many banks have niche markets and will target bankruptcy filers. These lenders have actually discovered and proven that they could build a business out of clients and manage the risk for people that have filed bankruptcy."
Harrington says there is a thought among lenders that those who file bankruptcy will be extra careful about their credit after it's wiped clean. "These people cannot file bankruptcy again for 7 to 10 years, so they're a great credit risk."
Harrington says to be cautious with debt consolidation companies. "If you're in trouble, you're not going to be able to get a loan. And if you do get a loan, it's going to be at a high percentage rate, which is really going to mess you up." There will also be a notation on your credit file that says you are going through a debt consolidation, which Harrington says will hurt your credit in the long run.