If you are in debt and struggling to get out, there are six very dangerous words that may affect your financial future in significant ways. If you hear these words, put up your guard, and question carefully whether they are true.

Before I tell you what those words are, let me first state that I am not a bankruptcy attorney or credit counselor, and I don’t run a debt relief firm. I consider myself first and foremost an educator, and my goal for the last twenty+ years has always been to try my best to provide consumers with reliable answers to their credit questions. The method they choose to resolve their debt problems makes no difference to me personally.

With that out of the way, here are those six dangerous words:

“Bankruptcy should be your last resort.”

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By taking these words to heart, many consumers have caused themselves needless heartache and enormous financial pain. Yet, these words are perpetuated by the news media, financial advisors, and creditors every day. (I am sure I’ve said them myself!) Sometimes those stating this “fact” are well-meaning in their advice, but at other times they have their own agenda that may be at odds with you getting the help you need.

Here are the some of the possible repercussions of taking these words to heart:

1. Your health will suffer. I can’t tell you how many people I’ve spoken with have become physically ill due to their financial difficulties. They don’t sleep, their stress levels are sky high, and they often suffer from depression. Some turn to alcohol, overeat, or find other unhealthy ways to self-medicate. Ironically, when people are under financial stress, they may also be unable to pay for the medical care they need, which only makes the problem worse. If that sounds like you, consulting a bankruptcy attorney can help. Even if you decide not to file, it will allow you to put some of your “what-if” questions to rest. Questions like, “What if I can’t pay the mortgage/credit cards/car payment? What can they do to me?” deserve an expert answer.

2. You will make expensive, and sometimes irreversible, financial mistakes. Nothing is as heartbreaking as talking with someone nearing retirement age who has cashed out their retirement savings to make payments on credit cards, only to find they have to file for bankruptcy anyway. Or to hear from someone who kept paying on an unaffordable mortgage while essential expenses, like medication or the car payment, went unpaid. These mistakes may only compound the problem and make it last a lot longer.

[Related Article: 7 Tips to Rebuild Your Credit Score After Bankruptcy]

3. You will be easily misled. You’ll likely spend a lot of time on the internet researching your options. Or, less likely, you may talk to friends or relatives. And you’ll probably get some bad or misleading advice in the process. You might think, for example, that you can’t file for bankruptcy because you make too much money. But bankruptcy laws are very specific to your state and your situation. Only an attorney can tell you how they apply to you.

4. You will remain stuck where you are. When writing my latest book, Reduce Debt, Reduce Stress, I interviewed a couple of people who filed for bankruptcy and described that as a turning point in their lives. (Yes, I also interviewed people who didn’t go that route.) After they filed, they were able to take stock of their lives and made important changes they couldn’t have made while they were still on the treadmill. They are now leading much happier, successful and productive lives. Sometimes bankruptcy, like a serious illness, is a wake-up call. The bankruptcy code is there for a reason—to give consumers a fresh start.

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The decision to file is not an easy one to make. It’s certainly not one to be taken lightly. And it is important that you consider all your options for resolving your debts. You may have other options, such as credit counseling or negotiating with creditors, that can allow you to resolve your debts and avoid filing.

But even if you think bankruptcy is your last choice for dealing with your financial problems, you shouldn’t put off talking with an attorney until the last minute.

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Declaring bankruptcy is a decision that not only impacts your finances but also the state of your credit score. While your score may decrease after financial hardship, there are practical and real ways to improve it and get back on a better financial path.

What Is a Credit Score?

Before you start taking steps to fix your credit score, it is important to know what the score is and why it’s so important to your financial future. When you apply for any type of credit – credit cards, car loans, mortgage or rental agreements, student loans – the financial agency first looks at your credit history to determine if they should lend to you or not. Many lenders use FICO scores as part of those decisions. If your FICO scores are in the mid 700′s or above, that generally means you have good credit and it shouldn’t be difficult for you to get approved, provided you meet lender’s other requirements.

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How Do I Improve My Credit Score?

It is important that you understand what happens when you file a bankruptcy. A bankruptcy can remain on your credit report for up to 10 years and there is a good chance your FICO score will be low until you have started rebuilding your credit. You can take the following steps to start raising your scores.

Now, here are 8 tips to improve your credit score after bankruptcy.

1. Review Your Credit Report

The first step is knowing where you are and where you need to go. The first thing you should do is obtain a copy of your credit reports and make sure there are no errors or inconsistencies. You can try Credit.com’s Free Credit Report Card for an overview of your credit standing and an explanation of how it’s broken down, and you can request one free copy of your credit report per year from Equifax, Experian and TransUnion at Annualcreditreport.com.

2. Pay Bills On Time

Your payment history makes up 35% of your credit score. One of the easiest ways to improve your score is to always make sure you pay bills on time.

Tip: Set up reminders on your calendar to pay bills every month by the due date. Many banks and creditors offer services that allow you to set up your payments electronically so you don’t forget.

3. Apply for Credit…Cautiously

If you didn’t keep a major credit card account open during your bankruptcy, it’s a good idea to get one after your bankruptcy has been discharged. You may have to start with a secured card, which requires that you place a security deposit with the issuer. Once you get the card, it’s perfectly fine to pay the bill off in full each month. You don’t have to carry balances on your credit cards to build good credit.

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4. Add a Loan Down the Road

Once you have gone a year or two post-bankruptcy, consider getting a car loan or line of credit. If it’s a car loan, buy a vehicle that is affordable and that you can pay off successfully. You may receive a higher interest rate to start. Shop around for the best rate, and keep in mind that once you have raised your credit scores, your next interest rate on a loan will likely be lower.

5. Beware of Credit Repair Services

You may receive offers from credit repair services promising to help repair your credit. Make sure you thoroughly investigate these services before you use them. Their fees can be expensive. There are many ways you personally can rebuild your own financial future for no cost (compared to services that charge). In this case, DIY is often best.

6. Know Your Limits

Again, once you begin re-establishing credit, it is crucial to know the limits on your credit cards and to keep your balances well below them. You may have a very low limit due to your credit history. That’s okay. Use your cards sparingly and continue paying the bill on time.

7. Do Not Close Accounts

You may think you’re doing the right thing by closing lines of credit and swearing off all credit cards. This action does far more damage to your credit than you think. Closing accounts reduces the amount of credit you have available to you. This leads to lower credit scores. It’s best to keep the credit lines open. If you’re tempted to spend, cut up the card.

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The most important lesson to learn is to be patient. The road to bankruptcy did not happen overnight. And neither will the road to improving your credit. By following the guidelines above, the road to a better financial future and improved credit score is possible.

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Economic conditions are improving significantly nationwide, and because of this, fewer consumers are in such dire financial straits that they need to seek protection from their creditors.

The first three months of the new year lent a lot of credence to earlier predictions that bankruptcy filings would fall considerably throughout 2012, according to new data from Fitch Ratings. In the first quarter of the year, bankruptcies are about 8% or 10% lower than they were during the same period in 2011, though that rate is expected to level off soon. Banks are once again broadening credit standards, and therefore allowing those with iffier borrowing histories to access loans, which in turn increases credit risk.

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By year’s end, it’s likely that bankruptcies will have fallen between 4% and 5% on a year-over-year basis, the report said. However, the rate of improvement in bankruptcy filings made nationwide between 2010 and 2011 will be nearly impossible to match.

In fact, lenders may already be seeing those effects take hold, as the number of filings nationwide rose 19% between January and February alone, according to the most recent data from the American Bankruptcy Institute. In addition, the number of filings per day – since February only had 29 days compared to January’s 31 – rose 27%. However, those figures were still 5% below the rate observed last February.

However, some of those changes may have been the result of lingering economic effects, the report said.

“The stagnant housing sector and high unemployment continue to stress the cash flow of consumers and businesses,” said Samuel Gerdano, executive director for ABI. “As consumers and businesses work to shed tremendous debt loads, there are times when bankruptcy is the only shelter to provide financial relief.”

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Many consumers sought bankruptcy protection during the recent recession, and many experts had said that at some point, these would have to reach a nadir; there are only so many people whose financial situations are tough enough that they need to file for bankruptcy protection. Consequently, as with issues like credit card charge-offs or foreclosure proceedings, there had to be a logical point at which financial issues would begin to move in the opposite direction after a considerable amount of troubles suffered by consumers nationwide.

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A number of Democratic U.S. lawmakers are now making a large push that may help those in particularly dire financial straits to find relief from student loan debt, which currently cannot be discharged through bankruptcy.

U.S. Senators Dick Durbin, Sheldon Whitehouse and Al Franken joined with Reps. Steve Cohen, Danny Davis, George Miller and John Conyers to introduce bills that will allow consumers to clear outstanding private student loan debts when filing forbankruptcy, Durbin’s office announced. Prior to the passage of new bankruptcy laws in 2005, these loans could be cleared like any other private debt, but are no longer able to be discharged. Durbin first introduced legislation to change that policy in 2007.

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“Students, especially those at for-profit schools, who find themselves unable to get enough government aid to pay their high tuition are turning to private loans to fill the gap,” Durbin said when announcing the proposed legislation. “Unlike federal student loans, there are few consumer protections available for these private student loans leaving some students stuck with this debtfor the rest of their lives. Today’s bill will restore some fairness in student lending, by allowing financially distressed borrowers of private student loans to discharge those loans in bankruptcy, just as other types of private debt can bedischarged.”

[Related Story: 7 Savings Tips for College-Bound Students]

Billions of dollars worth of private student loans are now being issued every year, and many of these carry interest rates as high as 15 percent. Federal student loans, meanwhile, carry interest rates in the single digits. However, many students seek out the private lines of credit when they find it difficult to qualify for federal loans, or simply don’t get as much financial help from the latter type as they need to cover their various costs, including tuition, room and board, necessary supplies, and so forth.

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Students looking for help making ends meet without taking on costly student loans may want to talk to their college’s financial aid office about the options that may be available to them, including scholarships, grants and so forth, as these options will help consumers finance their education without incurring debt. However, failing those options, the office can also help students find the most affordable student loans available. In many cases, all it may take is asking for help tofind a wide variety options.

[Related Story: Defaulting on Private vs. Federal Student Loans]

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Millions of young adults graduate from college every year and have the hope of quickly gaining some amount of financial independence, but these days, many are having their ability to reach those goals hindered by massive amounts of student loan debt.

Federal statistics suggest that 68.1 percent of high school graduates go on to college these days, and that the average debt burden carried by young adults when they graduate college had risen to $25,250 in 2010, up 5 percent from the previous year alone, according to a report from Investopedia. That year alone, the value of student loans outstanding nationwide surpassed $100 billion, and climbed to a total of more than $1 trillion overall.

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As a consequence, many experts believe that the amount of debt being carried by recent college graduates could become a significant problem for the economy as a whole, and that the problem is only going to get worse, not better, in the coming years, the report said. Over the past 50 years, college tuition costs have risen between 6 and 9 percent on average, more than twice the normal rate of inflation, and an education at even the most affordable schools is now something that many young adults will find it difficult to pay for. Some people are graduating with more than $100,000 in student loan debt to their names, and may eventually have to pay the equivalent of a mortgage payment every month for as much as 20 years to cover those costs.

Another issue that many face is that, unlike other types of debt, student loans aren’t cleared from a troubled borrower’s obligations when they file for bankruptcy, the report said. That means that even if a consumer is in dire financial straits and has no other recourse but to seek bankruptcy protection, they’ll still be responsible for every penny of their remaining student loan debt throughout that process.

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Some experts say that because of these problems with student loans, it might be more difficult for recent college graduates to make other, larger purchases that are typically viewed as helping to fuel the economy, the report said.

In addition to student loan debt, recent studies have also found that many young adults are now also graduating with thousands of dollars worth of debt in their name spread across several credit cards.

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