Avoid Bankruptcy - How To

Total All Your Debts

Only once you have a true picture of your debt can you take the next steps to avoid bankruptcy. Gather every bill, every statement, and every document that has an effect on your financial situation. Total up both your debts and your assets. Include your mortgage as a debt and the value of your home as an asset.

Now break down those debts into good and bad categories. Good debts are home loans and student loans. Bad debts are credit card debts, personal loans, high-rate car loans, and medical bills.

You should also list the interest rates and minimum payments for all your debts.

Reduce Your Expenses

Now total up all your expenses – everything you spend. Even the $1 you spend in the vending machine at the office should be included. Divide those two figures into necessities and non-necessities. Necessities are items you need to survive, like groceries and housing.

Non-necessities are nice things to have, but which you don’t need, like that vending machine candy bar or designer sneakers.

Add up the minimum payments on your debts and the monthly cost for necessities. This is the minimum amount you need to cover your bills for the month. If you don’t earn enough to cover them, then you need to find a way to reduce your minimum debt payments or necessities. Even little steps like switching from name brands to generics and canceling cable can help.

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