Justin narin has 5 years experience as a financial adviser; his key areas are loan consolidation, debt relief, mortgages etc. For more free articles and advice visit http://www.Bills.com
Although bankruptcy offers some people a clean slate, it is by no means an easy solution. Bankruptcy will destroy your credit and may possibly force you to sell your assets. It could also affect your future employment. In addition, 2005 bankruptcy reform laws made it more difficult to file for chapter 7 bankruptcy, and limited other bankruptcy rights.
If you want to preserve your credit, you will be much better off if you do whatever you can to avoid bankruptcy. Although it’s not easy, it’s worth the effort. Follow these steps to avoid bankruptcy.
Total All Your Debts
Only once you have a true picture of your debt can you take the next steps to avoid bankruptcy. Gather every bill, every statement, and every document that has an effect on your financial situation. Total up both your debts and your assets. Include your mortgage as a debt and the value of your home as an asset.
Now break down those debts into good and bad categories. Good debts are home loans and student loans. Bad debts are credit card debts, personal loans, high-rate car loans, and medical bills.
You should also list the interest rates and minimum payments for all your debts.
Reduce Your Expenses Now total up all your expenses – everything you spend. Even the $1 you spend in the vending machine at the office should be included. Divide those two figures into necessities and non-necessities. Necessities are items you need to survive, like groceries and housing.
Non-necessities are nice things to have, but which you don’t need, like that vending machine candy bar or designer sneakers.
Add up the minimum payments on your debts and the monthly cost for necessities. This is the minimum amount you need to cover your bills for the month. If you don’t earn enough to cover them, then you need to find a way to reduce your minimum debt payments or necessities. Even little steps like switching from name brands to generics and canceling cable can help.
If you can cover your monthly bills, but aren’t making enough to pay down debt, then start cutting non-necessities until you free up enough money to reduce your debt.
Consolidate Debt
If you have multiple small debts, getting rid of any one of them can be a challenge. By consolidating debt, you not only reduce the total number of bills and minimum payments you owe, but you also reduce the interest rate. So you can reduce your debt faster.
In addition to consolidating debt, you can get out of debt faster by paying more than the minimum payment every month. Funnel as much money as you can towards your debt every month.
Consult a Credit Counselor
Contact a reputable credit counselor if you need help totaling your debts, finding ways to reduce expenses, or consolidating debt. In addition to teaching you money management, they can help you qualify for a consolidation loan, whether it’s in the form of a home equity loan or a personal loan. In some cases, they can help you set up a debt management program. Although there are fees, it may be what you need to avoid bankruptcy.
Consider Debt Settlement
If your debt vastly outweighs your income, then you may need to consider debt settlement. A credit counselor may be able to negotiate with your creditors to reduce the balance owed. Although debt settlement will ding your credit, it’s not as big a hit as bankruptcy. Debt settlement shouldn’t be taken lightly, but it is a way to avoid bankruptcy if you’ve exhausted all other options.
No matter how you got into debt, you can get out of it without resorting to bankruptcy. Although there are situations where it’s the only reasonable option, it’s best for your credit and your financial future to avoid it.
For more articles on avoiding bankruptcy, visit bills.com
- Related Videos
- Related Articles
- Ask / Related Q&A
- Credit Counseling Costs Consumers More than Debt Settlement
- How To Use Debt Settlement Companies For Credit Consolidation
- Debt Settlement Options
- Debt Settlement Information
- When Debt Settlement is Right for you
- Alternatives to Debt Settlement
- Debt Management Programs Or Debt Settlement Plans?
- Debt Settlement Really Provide Help for Credit Card Debt?




Young people 'popular target for credit card fraudsters'
By: Sam Gooch | 11/11/2009It is crucial that people take steps to prevent their financial information from being compromised by identity thieves, it has been reported.
Renovation Tax Credit
By: Alex Vitti | 11/11/2009An eligible residential unit is a residence built before 2009. The individual who incurs the home improvement or renovation expenses must be the owner (or co-owner) at the time the expenses are incurred. The residential unit must not only be the owner's principal place of residence, but also:
A lump sum Individual Voluntary Arrangement can solve personal debt problems for Self Employed
By: Derek Cooper | 11/11/2009For a Director, Sole Trader or someone who is self employed, if your business has failed, you may not be in a position to maintain monthly payments into an IVA. There is an alternative lump sum IVA which may well be the right personal debt solution for you.
The True Test For a Commodity Trader or Forex Trader
By: Andrew Abraham | 11/11/2009There is only one true test for either a commodity trader...or even an investor in trend following with a commodity trading advisor. I am not trying to be funny...but this is a true test an old timer told me. Everyone thinks they accept risk...but when it comes down to truly accepting the risk do they? ( In most cases...NOT).
Fast Cash Payday Loan-Best Way To Met Short Term Needs
By: Ravi Mishra | 11/11/2009payday loans are easily available on the internet. You can get them by filling an online form. Your application is entertained immediately after its submission.
Research needed to ensure you get the best life insurance
By: Kim Chambers | 11/11/2009Knowing exactly the cover required will ensure that your family is appropriately covered as well as ensuring you don’t pay too much ensuring you and your family benefit from choosing the best life insurance policy for you.
Parents 'raid savings to fund property purchasing'
By: Sam Gooch | 10/11/2009Mums and dads are prepared to withdraw cash from their saving accounts to help their grown-up children purchase their first home, a new study indicates. Significant numbers of parents are withdrawing money from their saving accounts in order to help their children get on the housing market, new research shows.
Consumers seek the best credit cards in time for Christmas
By: Sam Gooch | 10/11/2009Many consumers will see the Christmas pinch magnified this year as the UK continues its struggle to escape recession.
Understanding Judicial Foreclosure
By: justin narin | 05/08/2009 | MortgageForeclosure is one of the most severe and difficult financial processes for any consumer. Unfortunately, foreclosures are also peaking, meaning thousands of American families are now facing this dire consequence. What does it mean, and what can you do to avoid foreclosure?
Subprime Loans and the Real Estate Market
By: justin narin | 29/07/2009 | Real EstateThe Subprime Loan Fallout is Affecting All Areas of the Real Estate Market
Get the Best Mortgage Refinancing Rate
By: justin narin | 27/07/2009 | Personal FinanceIn order for you to get the best mortgage-refinancing rate available to you, you will have to do a little research and a little math. Because it costs money out of pocket to refinance, it is only beneficial to you if you plan on staying in your home long enough to make up the difference between your refinancing costs and your interest savings.
FHA Mortgage Insurance
By: justin narin | 22/07/2009 | Real EstateThe FHA loan insurance program was created to help first-time buyers get into homes. However, first-time buyers usually don't have 20% down payments and may have a spottier credit history. In order to provide protect taxpayers from paying for defaulted FHA mortgages, the loans include mortgage insurance premiums (MIP).
Find the Best Bad Credit Second Mortgage
By: justin narin | 20/07/2009 | MortgageAlthough it seems strange to take on more debt to improve a bad credit history, a home equity loan may be the solution to your financial problems. Learn when you should consider a loan, and when to look for other options.
Things to Consider with a Refi Mortgage
By: justin narin | 20/07/2009 | MortgageA refi mortgage can be used for several purposes – to lower your interest rate, to lock in a fixed interest rate, to pay off credit card debts, or to combine two mortgages into one. It is a substantial financial decision to make, so make sure you are well informed with information before taking any action on a refi mortgage.
Refinancing Second Mortgage
By: justin narin | 17/07/2009 | MortgageA second mortgage, also called a home equity loan, often has a much higher interest rate than a first mortgage. Discover the money saving benefits of refinancing a second mortgage.
Home Equity Loan or Home Loan Mortgage Refinancing?
By: justin narin | 14/07/2009 | MortgageIf you are considering taking out a secured loan against your home, two of your options are home loan mortgage refinancing with cash-out or home equity loans. Depending on your particular situation one may be better for you financially that the other.