Is your mailbox filling with past-due bills? Are you receiving constant calls from bill collectors? When you file for bankruptcy it becomes part of the public record, and will remain on your credit report for up to ten years. Most people believe that filing bankruptcy voids all of your debts. This is not the case. Money you owe to the IRS, alimony or child support, education loans, cash advances, and new purchases over $1,000 will remain your responsibility even after declaring bankruptcy. Luckily there are ways to get out of debt and avoid bankruptcy altogether.
One of these ways is through debt consolidation. Companies who provide debt management services work with those whom you owe money to, and get your balance or interest reduced. The debt management company then combines your lower bills together, and you then make the lower, combined payments to the debt consolidation company who is running your debt management program. Most have several plans to help get you back on your feet as soon as possible. Your debt can be eliminated in 1-3 years, but the amount of time it takes really depends on how much debt you have. Going through a debt management program won't erase your bad credit, but it will put you on the way to improving your credit by eliminating any future late payments on the bills you are already behind on.
Most consolidation companies require you to have a certain amount of debt on your credit cards and other loans. If you don't meet their qualifications there are still other ways to avoid bankruptcy.
You can start by planning a budget. You need to know how much money is coming in, and how much is going out. If more is going out than in, you've got a problem. Getting over this problem will require you to do one of two things. First, it may involve scaling back your spending. This includes selling items that you can't afford (that new boat), cutting entertainment expenses, and perhaps even moving to a smaller, less expensive home. Second, if you don't want to scale back (or if you have more than you want to already) another solution is to increase your income. This can be done by getting a part time job, begging for a raise, or finding a new job. Part of increasing your income may involve increasing your education.
Use the money you have found by scaling back or by working extra hours to pay off debt. Write down the debts you owe. Make payments towards the debt with the highest interest rate first. Pay it off, and use the money that was going toward that debt to start paying off the next in line. Continuing to follow this process can help you avoid bankruptcy.
Once you have begun paying off your debt it is important not to add to it. Don't use the extra money to get yourself back in debt. Save it! That way when your car breaks down, or you have a trip to the emergency room, or any other unexpected thing comes up, you'll be able to pay for it, instead of going into debt because of it. You'll be able to avoid bankruptcy for your entire life.
By Clint Hunter