How to Wipe Out Debts Without Bankruptcy

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You don't have to declare bankruptcy to wipe out debts. Declaring bankruptcy is the act of declaring that you are unable to pay your creditors. It is most often initiated by the debtor in an effort to eliminate crushing debts and start fresh. While bankruptcy will stop debtors from calling and allow you to get your finances back in order, it will also cause you to give up some of your possessions and affect your credit rating for many years. Bankruptcy can keep you from getting certain jobs, and from buying a home or vehicle on credit for up to 20 years. It may be much wiser to eliminate your debts without bankruptcy. Here are some tips you should follow.

  • Stop spending. Many people end up in a bankruptcy situation because they are spending more money than are making. Closely examine the amount of money you are spending and on what. Eliminate all non-essential spending until you have all of your bills in order.

  • Make more money. If you find that you are not making enough money to cover your bills, it may help to take a part time job for a period of time that will allow you to pay off some of your debts.

  • Downsize. If after evaluating your bills, you find that your living expenses cost more money than you can afford, then you need to find cheaper living arrangements. This can mean moving in with parents, or other relatives. This can mean moving from a large house to a smaller house. This may mean taking roommates into your own home. If your living expenses continue to be more than you make, no amount of bankruptcies or debt consolidation will help you.

  • Consolidate your bills: If you have equity in your home, it makes a lot more sense to pay off all of your bills using your home equity though a debt consolidation loan. When consolidating debt, be sure to not take so much money that your house will not be worth what you owe on it. Also, only consolidate your bills if your combined payment is a good deal less than your combined bills. The most important part of consolidating your bills is that you cannot run those bills up again. Destroy or lock away all revolving credit that you just consolidated.

  • Pay one bill at a time. If debt consolidation is not something you can do, you need to concentrate on paying off one bill at a time. After your basic bills and living expenses are covered, you need to take the balance of your income and concentrate on paying off your bill with the smallest balance. When that bill is paid off, determine which bill has the next smallest balance and use your excess money plus the money that went to paying the previous bill each month and pay off that bill. As you pay off each bill, you will find that the next bill will be paid off faster because you can apply more money to the bill you are concentrating on.

Tips & Warnings

  • You need to make a plan and follow through to eliminate debt
  • There is no such thing as a quick fix

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