You may be looking for any solution that will help you eliminate your debt while avoiding bankruptcy. One option is to sell off any valuable assets you may have and use the proceeds to help pay down your debt. Is this a good strategy? What kind of assets should you sell?
The important rule of thumb is that you should not sell the exempt assets, which are those that would be protected if you ended up filing Chapter 7 bankruptcy. Your state law will determine the specifics, but in most cases your primary home will be protected up to a certain value, along with pension plans, a reasonably priced vehicle, and your basic furniture.
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In most cases, it doesn't make sense to expose your protected assets in order to pay off unsecured debts like credit cards. Unsecured debts by definition do not have any collateral backing them up, so there is nothing for the creditors to repossess. They would have to pursue legal action and get a judgment against you before they can try to collect anything. (Of course, before that they can contact you, raise your interest rates, and refer you to a bill collector who doesn't really have much power.)
We're not saying that you should abandon your responsibilities and not pay your credit cards or other unsecured debts, but many people find themselves overwhelmed after making an honest attempt to keep up with their financial responsibilities. If after all this, you simply cannot keep up with your bills, you are entitled to protect your primary assets from creditors.
Having said that, you may wish to consider selling your nonexempt assets, which are the assets that a creditor would have access to if you decide to file bankruptcy. Perhaps you have an investment property or a second vehicle that your bankruptcy lawyer or financial advisor tells you would be taken during Chapter 7 liquidation. It might be a good idea to sell these assets and pay off as much of your debt as possible in order to try and avoid bankruptcy.
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