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Matt and Toni used their credit cards when times were good to buy furniture and otherwise set up their new household. They assumed they would keep earning enough money to pay off their debts.

But Toni, a home health aide, had stretches of unemployment between clients, so they starting using the cards to pay their other bills. She took six months off when she had a baby, putting them further behind.

Instead of rising, the couple's income is about half of what it was a few years ago, said Matt, who works for the state of Washington. Meanwhile, their revolving debt has ballooned to $50,000. And this fall Toni had another three-week gap in employment.

"That doesn't seem like much," Matt said, "but it was enough to really push us over the edge."


Matt had been toying with the idea of bankruptcy for years, but when he visited a lawyer he learned that he didn't have enough cash on hand to even start the filing.

"I've had the initial consultation," he said, "but am not able to pay the fee to have the means test conducted, much less the rest of the fees."

It's not uncommon for people to struggle so long with impossible debts that they wind up too broke to pay a lawyer or the filing fees for bankruptcy, said Henry Sommer, a former president of the National Association of Consumer Bankruptcy Attorneys and a supervising attorney at the pro bono Consumer Bankruptcy Assistance Project in Philadelphia.

Liz Weston

Liz Weston


The most common type of bankruptcy, a Chapter 7 filing that erases most consumer debts, typically costs $1,500 or more. A Chapter 13 filing, which involves a repayment plan, can cost twice as much.

Costs for both types of filings rose after the 2005 bankruptcy reform act imposed a means test and other limitations on filing. As costs have risen, so have the number of people filing without a lawyer's help -- by 187%, according to the Administrative Office of the U.S. Courts.

People who file for bankruptcy without attorneys rose from 6% of Chapter 7 and Chapter 13 filings in 2007 to 8% of Chapter 7 filings and 10% of Chapter 13 filings this year.

Now, some of these folks could simply hate lawyers, but more likely they're trying to save what little money they have left.

This strategy can backfire, though, since a poorly filed bankruptcy can be dismissed -- meaning you don't get any relief from your creditors -- or you could lose some property that might have been protected if you'd gotten competent help.

Before you risk that, consider the following options:

Figure out if you're judgment-proof. If your income and property are legally protected from creditors, you can still be sued, but the creditors won't be able to collect. That's known as being judgment-proof. You may be judgment-proof if you own very little and have no income, or if all your income is from Social Security, because Social Security payments are legally protected. The list of property that's exempt from creditors' claims varies by state (check here) but often includes clothing, household items and a car worth $2,000 or less.

If you're judgment-proof, you may not need to file for bankruptcy, Sommer said. You can just send a letter to your creditors telling them to stop contacting you.

There is a hitch in being judgment-proof: If your creditors go to the trouble to sue you and get a court judgment, they may be able to collect from you if your circumstances improve in the next 10 years. A bankruptcy filing, by contrast, would legally erase the debt.

If you think you may be judgment-proof, it may be worth scraping up a couple hundred dollars to confirm that with an attorney (you can get referrals from the National Association of Consumer Bankruptcy Attorneys). Some attorneys will charge less.

Expand your thinking. Your bank account may be empty, but there still may be ways to quickly raise the money you need to file.

Canceling pay TV and other luxuries could free up some cash, assuming you aren't on a contract that imposes early-termination fees. Selling property you're likely to lose in bankruptcy, such as a second car, could bring you the cash you need.

If you're still making payments on debts you hope to erase in bankruptcy, for example, you probably should stop and save up the cash instead. Sommer said some people continue making payments on such debts right up until they file, which really makes no sense.

"It's a habit or a sense of moral obligation," Sommer said. "Some people pay a little bit to everybody, thinking 'that will keep them off my back,' but that is not a good strategy."

Instead, you should prioritize the payments that matter the most -- your rent or mortgage if you plan to stay in the home, your car payment if you need your wheels to get to work, essential medical treatments, food and utilities.

If cash is really tight, you could even skip a utility payment if that would help you scrape up the funds to talk to an attorney.

Other sources of cash can include loans from friends or family, or your retirement funds. The loans would be legally wiped out in the bankruptcy filing, but that wouldn't prevent you from repaying them later. Using retirement funds to pay your creditors isn't advisable, since that money is protected, but it may be worth paying the taxes and penalties for such a withdrawal if bankruptcy would help you get back on your feet.

Look for low-cost help. Many bankruptcy attorneys offer discounted initial sessions. This session should give you a good idea of whether bankruptcy is an appropriate option and what you need to do to file.

If your income is at or below the U.S. poverty level (currently $18,530 for a family of three), you may be able to get free help from your local legal-aid society if -- and this is a big if -- the agency does bankruptcy work. Many legal-aid societies don't do bankruptcies or do very few because of limited funds. But your legal-aid society may be able to refer you to other low-cost or free services that may help.

A few bankruptcy courts have "pro se help desks," including the courts in Chicago and Milwaukee. These services are designed to help people who are filing without an attorney ("pro se").

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Document preparation services often tout themselves as cheap alternatives to hiring lawyers. But be careful. Legal-aid attorneys complain that some of these services give advice, even though they're not supposed to, and that the advice may be wrong. Given how complicated today's bankruptcy procedures are, you should at least read an updated guidebook, such as Nolo Press' "How to File for Chapter 7 Bankruptcy," currently in its 17th edition, before attempting to file on your own.

Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.