bankruptcy

Bankruptcy may sound scary and it should be. Filing for it should always be looked at as the last resort. It's a difficult and emotionally exhausting process, which requires the aid and expertise of an attorney. The legal costs can run up to thousands of dollars, and the effect on your credit score is quite damaging. Read on to see if bankruptcy is right for you.

Alternatives to bankruptcy. Are you really all out of options? You need to have given some serious effort to paying off your debt. Make sure that you've tried to lower the interest rate of your debt or negotiate better terms. You can also seek help from a credit counselor. Greatly downsize your living expenses with a smart budgeting plan and find ways to earn extra money.

Know the ramifications. Your life isn't going to be one clean slate after filing for bankruptcies. You'll still be responsible for some debt like student loans and tax debt. Although you filed for bankruptcy, anyone who you cosigned or guaranteed the loan with is still obligated to pay and may even have to pay off the debts you're off the hook for. Your credit score will be greatly damaged for years, which means that it'll be very hard for you to take out loans and the interest rates will be very high. You can also face problems when getting a new job since a lot of employers now request a credit report from potential hires.

Gather documents. You need to start gathering financial documents together for your lawyer. Get a hold of records of your debt, which includes credit card bills, unpaid medical bills, loan statements, and more. Find documentation of the assets you currently hold and monthly income statements. Your attorney will help you figure out what else you need.

Read on to find out more.

In this tough economy, the cold hard truth is that many of us are having trouble staying afloat amid our growing mortgage payments. With that in mind, here's an article from our friends at Wise Bread on the options you have.

Of all the changes you might make to live more cheaply, the most fundamental is finding a cheaper place to live. Sadly, it's an option that's largely closed to people who are underwater on their mortgages. Unless they have cash to cover the difference between what their house will sell for and what they owe, they're pretty much stuck. Here are six options for people in that situation.

RELATED: How to Check if Your Mortgage Statement Is Correct

Except for option No. 1, you'll definitely want to get legal advice well in advance of actually doing any of these. Situations differ and the rules are different in different states. In particular, the option to just "walk away" from a mortgage is not available in every state! There are tax consequences to doing that, and to several of the other possibilities. A consultation with a lawyer could save you tens of thousands of dollars.

With that proviso, here are the options I could come up with:

1. Suck it Up

If your house still serves as shelter and you can still afford it, there's no particular reason that you can't just go on living in it, pretty much without regard to its value versus what you owe on the mortgage.

This may be the most expensive option: You can't take advantage of the cost savings of moving to a cheaper place, plus you're putting significant amounts of capital into an investment that might never give you a good return. Still, as long as you can make the payments, this is probably the default option, and it's not necessarily a bad one. Eventually — no matter what happens to the real estate market — you'll be above water on the mortgage. (In fact, eventually you'll pay off the mortgage and own the house free and clear.) Continue reading for more tips.

>> The company that owns Betsey Johnson's boutiques is bankrupt, and as a result most of the designer's freestanding stores will close between May and July.

In a statement, the company said that it's spent months "rigorously pursuing alternative restructuring arrangements to address Betsey Johnson LLC's cash flow problems," to no avail. "After exhausting our resources and possibilities, it became apparent that neither a restructuring arrangement with a new equity investor nor a sale of the business enterprise as a going concern outside of bankruptcy was to be forthcoming."

Betsey Johnson LLC operates 63 of the designer's eponymous boutiques in the United States, Canada, and England. An executive at the company told WWD that some 350 people will be out of work when the stores close, but executives at Steve Madden — which saved Betsey Johnson from collapse in 2010 when it bought Johnson's $48.8 million debt — wouldn't confirm how many people would be affected.

Johnson herself won't lose her job. She's staying with the company as creative director and will focus on the lower-priced Betsey Johnson label sold in Macy's and other department stores. "I love the moderate price range," Johnson said. "It is in sync with all the girls who are buying my clothes." Mr. Madden said that the closure wouldn't interrupt wholesale deliveries to stores that sell Betsey Johnson and that there would be no impact on ecommerce availability.

Johnson executives are arranging an auction to determine which company will handle Betsey Johnson LLC's liquidation on May 8.

Photo: Betsey Johnson walks the runway with her daughter Lulu Johnson and granddaughter Layla Johnson at her Fall 2012 runway show.

There's always a feeling of confusion when a major retailer goes bust, but what we really want to know is what it means for us and how we'll be affected. American Airlines announced it was filing for bankruptcy this morning, which leaves loyal customers wondering what's going to happen to their miles and if it's going to be harder to book a flight with them. Here's a quick roundup of burning questions you might have:

Will American Airlines go out of business and stop flying?

When a company files for Chapter 11 bankruptcy, it doesn't mean it's going to close shop and disappear. It just means the airline gets time off from creditors to do some financial reorganization. Chapter 7 bankruptcy, on the other hand, would mean that business would close. American Airlines has not filed for that, and there seems to be no plans to do so. Airlines such as Delta, Continental, and United have all filed for bankruptcy and are now stronger for it after taking the time needed during the bankruptcy period to put their books in order.

Can I still use my miles?

Yes, the airline says that the frequent flier program will not be affected, and you'll be able to redeem and use your miles. In the past, airlines that have gone bust, such as Pan Am and Eastern, transferred miles to the airlines that purchased some of their assets.

What's going to happen to my flight?

You don't have to worry about the tickets you currently hold, according to Rick Seaney, the CEO of FareCompare, a company that helps customers find air travel deals online. “Tickets won’t be an issue because of the kind of bankruptcy they’re filing,” Rick tells Time. The airline has also said it will continue to honor tickets and reservations.

Read on to learn how you should manage your miles.