A recent report suggests that bankruptcy filings could soon be on the rise due to increasing concerns about the economy. However, bankruptcy isn't the only option for families facing overwhelming debt.

About four years ago, Steve Lundberg realized his debt was a significant problem, and initially, he believed bankruptcy was his only option. He had purchased a fixer-upper house, but the expenses were higher than he anticipated.

"All of a sudden, like an HVAC goes out, and that increases the debt that's on top of the stuff that I already knew I was taking on at the moment. ... I got into like $30,000 in debt," Lundberg said.

The average American household carries over $105,000 in consumer debt. LegalShield's bankruptcy index suggests that filings this summer could spike to a level not seen since the start of the COVID-19 pandemic.

"On top of bankruptcy, we're seeing similar increases in requests for legal services and things such as billing disputes, collections, contract disputes. Those things are leading indicators for future calls for bankruptcy," said Matt Layton, the vice president of consumer insights for LegalShield.

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Americans are being told to expect rising prices, and attorney Ben Farrow believes that this is why more families are considering bankruptcy.

"Once that uncertainty hits, you start looking at your own budget without a lot of savings, or even if you had a savings, if you don't have three to six months of savings, you're probably a little bit scared right now," Farrow said. "If every month you're borrowing to make ends meet, you are a serious candidate for bankruptcy."m

There are two paths for individuals considering personal bankruptcy. Filing for Chapter 7 involves liquidating assets to pay off debts, while Chapter 13 allows individuals to keep some assets and restructure their debt. Some debts, such as alimony and child support, cannot be discharged in bankruptcy. Student loan debt might be included, but only under very specific circumstances.

In Lundberg's case, he received help from a debt counselor at Money Management International. He followed a strict budget and was able to negotiate lower interest rates on his outstanding debt. About two and a half years later, his finances were back under control.

"I'd say the biggest lesson was to control your fear around money. ... But also look at alternatives. Weigh your options. Don't just pick the first thing that says, 'Hey, you should do bankruptcy,'" Lundberg advises.

Farrow adds that most creditors are willing to negotiate terms for debt repayment.

"There's always a deal to be made," he said. Striking a deal to lower interest rates on credit card debt could result in substantial savings while trying to pay off your debts.