Debt Help

How to Avoid Personal Bankruptcy

Credit card and personal debt can pile up so high, that people eventually feel they have no way out. Late payments and high interest rates continuously feed off each other, and debt relief seems impossible.

However, there is relief, and there is a way to manage your unmanageable debt to where you don’t have to file for personal bankruptcy. Bankruptcy is viewed as a last resort method of freeing yourself from debt, and it should stay that way. The consequences of personal bankruptcy – damage to your credit rating, inability to receive credit cards in the future or secure loans, emotional distress – are endless and devastating.

Obviously, avoiding getting knee-deep in debt in the first place is the first way to avoid such consequences. Personal budgeting, monitoring spending, setting credit card limits, strictly using cash and debit cards – these, like keeping a healthy diet and exercising to lose weight, are the simple, sure-fire ways of finding financial freedom.

However, if you land in a pile of debt at some point, there are ways to escape without having to file for bankruptcy.

First, you can seek to consolidate your debt by applying for debt consolidation or home equity loans. These loans will provide you the funds you need to pay off your debt. Of course there are risks to using these loans to absolve your debt: for example, if you were to default on your home equity loan, you run the risk of losing your home. However, if you feel confident you can successfully manage these loans, debt consolidation is a quick fix to a seemingly eternal cycle.

Second, you can gradually pay off your debt and avoid bankruptcy by committing yourself to paying incremental amounts of the balance each time you have to pay your credit card bill. Most likely, you got into debt initially because you found yourself unable to pay the full amount of your bill at the end of the month, and so all you paid was the minimum amount required. This got you into trouble because the amount left unpaid was charged interest, which accumulated and grew to absurd degrees, leaving you with more and more debt each month. However, if you make sure to pay above the minimum each month – and continue to increase this amount – you will eventually catch up with your debt. It might take awhile, but in the meantime you can use cash and debit cards to avoid piling on additional charges.

With all that said, perhaps the best way to avoid personal bankruptcy is simple: don’t bite off more than you can chew. Simply put, don’t purchase things – homes, clothes, cars, etc. – that you can’t afford right now.

If all else fails, filing for bankruptcy isn’t the end of the world. Get a good bankruptcy lawyer, go through all the necessary procedures, and you’ll resurface from the mess a new person. Just make sure your fresh start is used to its fullest, so that next time you will know how to keep yourself forever in the black.