Filing bankruptcy is a critical step for many people to take their finances from desperate to manageable. Bankruptcy allows you to declare a clean slate, and then to rebuild your financial situation from scratch. You can start fresh with a clean credit history, instead of trying to bring together the pieces of a ruined one. With a fresh start, you'll also be able to find new ways to manage your money, like budgeting and living within your means—methods that may never have been possible when you're weighed down by debt.

Bankruptcy can also help you get out from under crushing medical debts that have piled up as a result of an illness or accident. Medical debts can often be thousands or even millions of dollars in extreme cases, but since bankruptcy could wipe out all other types of debt, it's worth considering if you're struggling with medical bills that are completely unexpected or unaffordable.