How to Avoid Bankruptcy With Debt Management

Debt is an every-increasing problem for millions of Americans. And getting into debt has never been easier. With extra home mortgages, high-interest loans, and numerous credit card offers, it’s no wonder so many people fall into debt.

Further, as the economy continues to be weak, many people find themselves unable to pay their bills and they file for bankruptcy.

Bankruptcy is perhaps the easiest way to find relief from unbearable amounts of debt; however, it can also come with severe consequences. Whenever possible, a person should take a variety of other measures before turning to bankruptcy for relief. Bankruptcy, first of all, prevents a person from obtaining any credit. People cannot file for loans, and if you want to buy a home, it takes two years before you can qualify for home loan.

If you file for bankruptcy, you may even lose your assets, including your home, cars, and property. And recovering from bankruptcy is a long, drawn-out process. For at least three years, part of your income must go to pay your creditors, and you will have a blight on your credit report for seven to ten years. So even when you do qualify for credit again, it can still be difficult to purchase a loan or mortgage. And even if you are able to successfully take out a loan, your former bankruptcy means that you will have to pay higher interest rates than you would have had to otherwise.

Bankruptcy also makes it more difficult to save for things that are really important, including children’s education and retirement.

Bankruptcy can even damage future career opportunities. By filing for a bankruptcy a person becomes ineligible to become a director of a business or to hold other community and professional offices. Further, other people’s trust and confidence in you could be damaged, making it difficult to progress in your career.

Of course, sometimes bankruptcy is the only option available to some people in excessive debt. But it should not be seen as an easy way out. The consequences are anything but easy to deal with; rather, bankruptcy should be viewed as a last resort. The trick is to not let your debts become so unmanageable that bankruptcy becomes your only option.

If you find yourself falling further into debt, stop and take action now to better manage your debts. The following paragraphs include a few suggestions for those in debt on how to avoid bankruptcy and better manage your finances.

Of course, the first thing you need to do when managing debt is to stop purchasing things on credit. Further, if you have services or products you can live without, do so. Downgrade your car or cell phone plan. These products and services may seem like necessities, but once you’ve managed your debt, you will be able to have these things again, and this time without worry or stress about debt.

The best program for helping people get out of debt is an accelerated debt reduction plan. With an accelerated reduction plan, you organize all of your debts and make the minimum payment on all of them except one. You completely pay off one of your debts, usually the smallest one, by paying more money on it each month. When you’ve paid off that one debt, you move on to the next one, adding the money you were using to pay off the first one to the second one. And the cycle continues. Near the end, you should be paying a good chunk of money on just one debt until you become completely debt free. Accelerated debt reduction plans have been proven to be extremely effective behaviorally and are probably the best programs to implement when managing your debt.

When paying off your debts, many financial advisors suggest that you pay off the higher interest debts first. That way you spend less money on interest fees in the long run. Also, don’t borrow money for short-term purchases. Not only can small loans lead to major interest fees, but they also encourage the mentality that borrowing money for anything is acceptable when it is not.

Debt consolidation plans can also be effective if used properly. If you decided to consolidate your debts, you should make sure that all of your debts aren’t just swept into one big pile, and that you really are reducing your interest rates and number of payments.

Sticking to debt management plans can be difficult, and it’s easy to falter every once in a while and splurge on something you shouldn’t. Debt management takes discipline and motivation, and sometimes people need a support group to help them to stick to their debt management goals. Which is why Christian debt management services are often helpful. Aside from providing financial advice and helping clients develop a debt management plan that’s right for them, a Christian debt management service can also provide the extra bit of motivation a person needs to stick to his or her debt management goals.

Motivation is provided by structuring the debt management plan around common beliefs–in this case, Christian beliefs.

As debt is clearly taught against in the Bible, Christian debt management services will often provide daily reminders that help people keep their focus on the big picture. Their staff members will also help counsel, guide, and advise their clients according to the tenets of their beliefs. Of course, Christian debt management services are only one type of specialized debt management service, albeit the most popular. Finding support groups for people who are also trying to manage their debt wisely is another option to help you find the motivation you need to stick to your goals.