Most bankruptcy attorneys paint a picture of bankruptcy as a magical wand that, once waved, makes all of your debt and financial problems disappear. In reality, bankruptcy is a huge red flag on your credit for the next 10 years and does not eliminate several kinds of debt including student loans. Bankruptcy should therefore only be pursued in the most extreme cases after all other options have been explored.

To help you avoid having to file for bankruptcy, we have compiled a list of the top 5 secrets to successfully dodging the bankruptcy bullet:

1. Do Your Homework: You should begin by understanding the ins and outs of today’s complicated bankruptcy regulations. You will most likely find that not all of your debt qualifies, and that other considerations, such as the possibility of losing property and assets, make the idea of bankruptcy completely unappealing.
2. Setup a Strict Budget: Learn how to setup a monthly budget showing total income and total monthly expenses, including rent/mortgage, utilities, food and clothing, and entertainment. This will help you establish how much money is available for paying your debts, and will make it easier to identify any expenses that you can live without
3. Raise Money Any Way You Can: Sell off your clutter at a yard sale, take a weekend job, or get rid of a few of your luxury items (motorcycles, boats, jewelry, etc.) to raise some extra cash to put towards your debt. Once you are out of trouble, you can always begin saving again to repurchase these items.
4. Live a Cheaper Lifestyle: Changes in your lifestyle can significantly reduce your monthly expenditures, freeing up cash for use in debt resolution. Instead of that weekly dinner out with friends, start hosting a weekly potluck dinner where everyone brings a different dish. Maybe upcoming vacations are a camping trip to the mountains rather than an island getaway. Changes such as these can save a sizeable amount of money over a year’s time.
5. Consult a Debt Settlement Professional: If you are still having trouble keeping up with growing debt, consult a debt settlement professional to come up with a strategy for settling your debt. By negotiating with your creditors, debt settlement professionals will be able to settle your accounts for a fraction of the amount owed.

Carefully evaluate all possible solutions and alternatives prior to moving forward with a bankruptcy filing. You may find that things aren’t as bleak as they seem, and you may be able to enjoy financial independence sooner than you think.

This article is for informational and educational purposes only.  It is not intended to provide legal, tax or financial analysis.  Please consult your attorney, accountant or tax advisor if you have legal, financial planning, or tax related questions.

Related Posts:

1. The Cost of Bankruptcy to You
2. The 3 Secrets to Completing a Debt Settlement Program
3. 4 Biggest Drawbacks to Bankruptcy
4. What is Bankruptcy?
5. BANKRUPTCY IS NO MAGIC BULLET