How to Avoid Bankruptcy

You have found yourself drowning in debt. You have financially over extended yourself. You have credit card companies calling you and sending you letters. You are barely making ends meet. You are facing bankruptcy and this is not the route that you want to go because bankruptcy will follow you for the next 10 years of your life. How to avoid bankruptcy is now your challenge

Difficulty: Moderate

Instructions

Things You'll Need:

• Determination, telephone, pen and paper, bills

Get Organized

1. Write down all your debts. Get a pen and paper, sit down and look at everything you owe during a month's time. You have to compare what you owe each month to what you earn each month. Write a strict budget and have the determination to stick to it.

2. Call your creditors. Explain your circumstances. In most cases, if you have been faithfully paying your bills on time and you have run into temporary financial hardship, your creditors will work with you. They may adjust your payment amounts or they may be willing to postpone a payment and move it to the end of the billing cycle. They may be able to readjust your pay due dates to meet your pay schedule. All it takes is a bit of effort on your part to work with your creditors

3. Refinance your home and consolidate your bills. By refinancing you home, the interest that you are now paying is tax deductible. You will be able to raise your credit score by paying off your credit cards and closing out previously open accounts.

4. Pay more than the minimum on a credit card. Be frugal in your habits, instead of buying a lunch five days a week, pack your lunch and you will be saving at least $50 per week. That $50 can now be applied to one of your credit cards. As you pay off a credit card, do not think that the money is yours. Pick the next lowest card and apply both payments to the next card. Close the credit card that you have paid off.

5. Get a second job. The second part time job could allow you to dedicate all the money that you earn from that part time job directly to one of your credit cards or loans. By making additional payments, the principal will decrease and you will be able to pay off the bill.

6. Consult a Consumer Credit counseling Service. Every state has one. Google your state's name and pull up a reputable Credit Counseling Service. The Credit Counseling Service will work with your creditors to reduce the amount that you owe each month. They will assist you in working out a workable budget and help you reduce your credit debts and thus avoid bankruptcy

7. Negotiate a settlement figure with a creditor. Many times they are willing to settle for less than what is owed rather than not getting anything at all.

8. Document all of your transactions, letters, and correspondence. Keep a complete record of who you spoke to, what terms were discussed for repayment, and any letters received from your creditors. Keep all of your check records or money order records in a file.

Tips & Warnings

• Contact your creditors. They want their money and are willing to negotiate with you to obtain any portion that they can get.
• If you are going to go to a Credit Counseling Service, make sure that it's not a scam. Check with the Better Business Bureau for any information that is available on your chosen Credit Counseling Service.