Bankruptcy should always be the remedy of last resort.  Accordingly, there are several factors that must be considered before you choose to address your debts with bankruptcy or attempt to negotiate them instead.

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Amount of Control.  If  you choose to negotiate your debt, you maintain some control over the order in which you address your various debts, the terms of payment and the amount offered. You are able to retain assets which you would otherwise have to relinquish in a Chapter 7 and you would not be subject to a strict payment plan as in a Chapter 13.

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Ability to File Bankruptcy.  If you have significant assets which are not protected by exemptions, you are significantly behind on payments for a house or car that you would like to keep, or you do not meet the Means Test requirements, then you would not qualify for a Chapter 7 Bankruptcy but could consider a Chapter 13 Bankruptcy.  However, a Chapter 13 Bankruptccy, known as "the wage earner's plan", requires that you have a steady income and may require that you pay more per month toward the plan than you think you could afford.

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Post Resolution Affects.  A Chapter 7 Bankruptcy remains on your credit report for 10 years but you no longer have to worry about the debts after your discharge.  A Chapter 13 Bankruptcy remains on your credit report for 7 years after the date of filing but takes 3 to 5 years to complete.  Many employers will disregard potential employees with a bankruptcy history.  Additionally, a bankruptcy could effect your ability to obtain various licenses in professions where financial responsibility is important such as law, real estate, or financial management.  Resolving your debts through negotiation will appear differently on your credit report as "settled" or "paid".  However, the delinquent accounts on your credit report will continue to appear delinquent until they have been settled or paid.

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Amount of Debt and Ability to Pay.  If your debt is less than $10,000, then filing for bankruptcy can be a rather extreme choice.  Bankruptcy is better left as a solution of last resort because of the post resolution affects.  Conversely, if you are living paycheck to paycheck, you will not have extra money left over to negotiate debts and will be forced to file a Chapter 7 Bankruptcy.

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Your Age and Source of Income.  If you are older, have no assets excluding your home and are living on social security, you may be considered what is known as "judgement proof" meaning that even if a judgment is entered against you for anything not related to your home, there is no way for the creditor to force you to pay the debt.  Depending upon how you choose to address the debt, your "judgment proof" status affords you leverage in negotiating the amount of a debt as well as a payment plan.  If you are younger, you may not wish to have a bankruptcy on your credit report at a time when you are starting your credit life and looking to buy an automobile, rent an apartment, get married or buy a home.