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Step 1
Negotiate with your creditors. Many creditors will receive absolutely nothing if you declare bankruptcy, so they are typically willing to look for alternatives. Your creditors may be willing to accept a settlement for a portion of the money owed to them, rather than risk trying to recover funds from you during bankruptcy proceedings.
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Step 2
Consolidate your debt. Debt-consolidation alternatives offer a chance to bring all of your debt to one creditor (usually a bank) that can give you a much lower interest rate than the typically high rates on credit cards and other debts.
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Step 3
Take no action, rather than declaring bankruptcy. If you have no wages or property, you are "judgment proof," meaning that a judgment would have no effect on you. However, if you acquire property or a steady income within the next 7 years, creditors could instigate proceedings.
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Step 4
Make a formal proposal plan to your creditors. In the U.S., you can file a "Wage Earner Plan" under Chapter 13 that will allow you to make payments that will be distributed to creditors. A Wage Earner Plan can last up to 5 years.
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Step 5
Attempt to meet debts. If you can find a way to pay off your debt, you will avoid the blemish of bankruptcy on your credit report. You may be able to pay it off in parts or find an additional source of income.
