How to Get Out of Debt Without Filing for Bankruptcy

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Many Americans live outside of their means. Whether it's keeping up with your neighbors or something unexpected, numerous people have gone outside of their budget and have plunged deep into debt. To dig out requires a lot of hard work, but after you have done so without calling a debt consolidation firm or filing for bankruptcy, you will feel like the wealthiest person in the world.

Things You'll Need

  • Pen and paper/Excel spreadsheet
  • Calculator
  • A listing of all debts
  • Make a list of all debts you owe using the following format, preferably in Excel: Credit Card... Card Credit Number... Total Amount Owed... Minimum Monthly Payment. List all of the consumer debt you owe. Be honest with yourself! Be sure to include all credit card debt, student loan debt, mortgage payments, etc. Include everything.

  • Devise a budget. What do you bring in per month versus what you pay? You need to account for everything - don't forget insurance payments, cable bills, daycare, minimum credit card payments, fun money, you name it. Basically every dollar you bring in should be accounted for. If you have extra - congrats! If not, you're like many people. Look into ways to make more money. It'll be tough for awhile, but the payoff makes it so worth it! Imagine living your life free of debt.

  • Make a promise. Obviously, since you are in debt to begin with, you can't trust yourself with "just one" or only for "certain purchases." Just vow to put them in a drawer or a block of ice. Take your list of debts owed, and order it from the smallest balance remaining, to the largest. This is the order in which you will pay off debt.

  • Pay down smaller debts first. What do you owe on the smallest credit card or other debt that you are going to pay off first? The goal is to get that paid off ASAP; paying down the smallest debt first earns you a small "win" and will entice you to pay off more. Your minimum monthly payment is already listed in the budget you made. Your goal is to put every available penny towards that ONE small debt, and pay the minimum on all others.

  • Take that money that you were applying to the first credit card or debt, and after that first debt is paid off start paying that amount to your next debt. Continue this process until you are out of debt! The snowballing process is really fun once you get through the first few hard weeks!

Tips & Warnings

  • Be honest and be patient
  • If you want to get out of debt, it has to be your sole focus
  • Pay off debts in order, smallest to largest
  • This can be extremely hard work. You may be working a normal 9-5 and then delivering pizzas or working part-time online or at the mall to make this work. But, constantly "owing" is no way to live.

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