In January, we’re supposed to sit down and organize our personal finances. This year I’ll risk my good-girl reputation with a subversive idea: go bankrupt in 2011. If you’re reaching the end of your rope, don’t try to hold on. Save what you can.

It’s painful and humiliating even to consider bankruptcy, let alone join that crowd in the courthouse corridor, waiting for your name to be called. Normally I’d say suck it up, cut spending and repay your consumer debt. But that’s not always possible, especially with an economic tsunami rolling over your home, job and health insurance.

Most families, honorable to the end, struggle longer than they should, says Katie Porter, a law professor at the University of Iowa. By the time they give in, they’ve lost assets they could have used to start over again. That defeats the point of bankruptcy—to stop the self-blame and hopelessness that goes with bad luck and bad bills, and give yourself a second chance.

The right time to go bankrupt is when you’re financially stuck but still have assets to protect. You can use Chapter 7, the most popular type, only once in eight years, so draw up a “no kidding” plan for living on your income when you’re finally clear. “If you’re out of work, try not to go bankrupt until you have a new job and can see what’s ahead of you,” says Harvard Law School professor Elizabeth Warren…

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