How to Avoid Bankruptcy

When you're monthly expenses are more than your income you can find your self caught in a debt spiral where your income is fixed but your debt is mounting. If you've reached the point where the spiral is irreversible it's time to file for bankruptcy. But you don't know that for sure until you make an honest assessment of your financial situation and explore all your other options.

• Assess your financial situation
• Discover your options
• Find help
• Move toward the black

Look Before You Leap

One reason people wind up in a debt spiral is they have their head in the sand about money. If that's you it's time to pull your head out and take a hard look at how much you make, how much you spend and how much you owe. The idea behind going from the red to the black is simple:

• Make more
• Spend less
• Pay down debt

Getting it done is a lot harder. It's going to take self-discipline, tough decision making and maybe reaching out for some help.

Making More - Unfortunately making more in today's climate is tougher and tougher. If you are working consider asking for a raise or taking on a second job or extra part time work if you're in a position to do so. If you've lost a job or had wages cut you may be eligible for government assistance like unemployment benefits, food stamps or Medicaid. There are millions of Americans who are eligible for government assistance but don't apply in their time of need. That's what those programs are for.

Spending Less - It can be hard to reduces fixed expenses like rent but there are almost always places you can cut back on discretionary spending:

• Don't eat out
• Take public transportation
• Clip coupons
• Avoid impulse shopping for clothes, electronics, etc.
• Stop paying for things with credit!

• You may be able to negotiate down your monthly payments, interest rates or even part of your debt. Creditors stand to lose more if you declare bankruptcy so they may be open to working with you on a payment plan if you're up front with them
• If you have money in a low interest savings accounts it probably makes sense to use some of it to pay down debts like high-rate loans and credit cards
• Consolidate bills like credit cards by using one low interest card to pay off several higher interest ones. You'll have fewer bill to pay, lower minimums to make and may be in a position to use the saving toward paying down the principle

Help!

If you've tried it all and are still under water every month there are non-profit certified credit counselors that can help. They can work to consolidate your debts, negotiate with your creditors and educate you on the other options available to avoid bankruptcy. If you find one be sure to check them out with the Federal Trustees Office or the Better Business Bureau to make sure they are legit.

While bankruptcy may eventually be your best option you may not be there just yet.

• Bankruptcy Alternatives - Other Ways to Survive Overwhelming Debt
• Bankruptcy and Credit Counseling - New Law Dictates Mandatory Classes
• Do I Need a Bankruptcy Lawyer to File Bankruptcy?
• Is Bankruptcy Right for You? - A Summary of the New Bankruptcy Laws
• Two Types of Bankruptcy - Chapter 7 and Chapter 13
• Learning More About Your Bankruptcy Options

• Can filing bankruptcy stop my creditors from harassing me?
• How does the new bankruptcy law affect me?
• What alternatives are there to filing bankruptcy?
• What is better for my credit, filing bankruptcy or enrolling in a debt repayment plan?
• What steps do I need to take before I file for bankruptcy?
• What's the difference between chapter 7 and chapter 13 bankruptcy?
• Will filing bankruptcy wipe out all of my debts?

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