Avoid Bankruptcy - How to Avoid Declaring Bankruptcy

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How to avoid personal bankruptcy and debt

Of course, it is certainly possible to avoid bankruptcy - the premise is simple, live within your means and don't spend what you don't have. Plan for the future. Look ahead. But sometimes that's easier said than done. Just start small, and soon keeping an eye on your spending habits will become second nature.

Maintaining a realistic monthly budget is the No. 1 way to keep track of your personal finances. You can do this yourself by keeping a record of your monthly expenses such as rent or mortgage payments, groceries, transportation, insurance, savings, credit card payments, utilities, household supplies and toiletries, entertainment, vacation and emergency funds. If you have a phobia of paperwork, computer programs are available that will design a budget to help keep you afloat, plan for retirement, or save for a vacation. There are plenty of free tools available on the Internet, such as cash flow calculators and downloadable spreadsheets.

Be sure to keep a current record of all your debts and payments. It's as easy as writing down a summary of your credit card spending each month. Buy a three ring binder and keep any documentation of spending, including receipts and utility bills. Not only will this help avoid bankruptcy, but it is beneficial to maintain a record of your bills to reduce any misunderstandings with the company. If you track how much money you take in, compared to how much goes out, you'll have a much clearer idea of where you stand financially.

When paying bills, try to sign up for a direct debit payment plan - creditors will be glad to take the money from your account each month, and it reduces chances that you may forget to pay a bill and incur penalty charges and/or interest.

Be careful with credit cards. It can difficult, as we live in a society obsessed with the idea of charge and consume. But with interest rates ranging from 15 to 18 percent, it's easy to be swallowed by credit card debt. Try to refrain from charging; instead, make use of a debit card which automatically subtracts the money from your account, often clearing transactions by the end of that same day. If you do choose to use credit cards, apply only for those with low interest rates - try for under 13 percent - and pay them off as soon as possible. Don't fill your wallet with plastic - stick to only one credit card.