Bankruptcy is one of the tougher choices we as adults face in today?s society where it is the norm to be in debt, albeit some more so than others. Credit card offers materialize whether you are looking for credit or not. All with their own perks and benefits may sound tempting enough to open and start charging. After all that free toaster oven, or the free airline perks might go a long ways! Or on the second look they might not be so free after you account for the interest rates or the additional card usage charges that some credit card companies place into your annual or monthly charges. We all like the word free, after all there?s not a whole lot better than getting something and not having to pay for it. However that portion of the topic is for an article somewhere down the line at another time as this article is to serve as focus on the tough choice of filing for bankruptcy protection.

If necessary bankruptcy provides a very valuable and viable option for those who must find a way to get out of their current financial situations. With the medical costs increasing annually and the cost of living seeming to increase daily, just look at the increasing cost of groceries or fuel at the pumps for an example, it is more understandable as to why over so many Americans filed for bankruptcy protection last year.

On the same note it is important that an individual takes all necessary precautions when making the decision to file or not. Here are a few things to review before you seek help.

Household Budget ?

Have you worked on creating a household budget that you can stick to? For example purposes lets say that you have a cell phone bill that averages $75 dollars per month. Let?s also say that you have a cable TV bill that runs about $60 dollars per month. By removing those two items you could potentially free yourself an additional $135 dollars to pay towards your outstanding debt. This may not seem like much but let?s say we factor in other cost such as your entertainment expenditures, magazine subscriptions, cigarettes, eating out, things that are more for pleasure but not needed to make it. You could potentially save several hundreds of dollars to apply to other debts that require payment. Adjusting your budget may even allow you to pay more than needed therefore getting yourself out of debt sooner than initially thought.

Employment ?

Few of us want to work more. Work is one of those things that we know needs to be done however it?s not always the brightest way to spend our days. However I recommend that you look at your schedule to determine if you are capable of finding a short time job to help pay back your debts, or at least give you the head start needed to help you gain control of your finances and possibly avoid bankruptcy. Would working an additional 20 hours a week for 3 months give you the financial lift needed to reduce your debts to the point where when coupled with a restructured household budget give you the lift needed to resolve your debts on your own? For example let?s say you are able to pick up a part time job at $7.50 per hour for 20 hours per week. Let?s say your taxes are 25% of your gross pay. You would end up netting $450 per month. This might not seem like much, however if you do this for three months you could apply $1350 dollars towards your total debt. If you add that along with the money you potentially saved after reviewing your household budget this could lead to an additional $1950 dollars that you may be able to apply towards your outstanding debt based on an average of a $200 monthly savings from your newly created budget plan.

Secured Debt ?

In some situation bankruptcy may be able to be avoided if an individual looks at their secured debt and can find if they may be able to reduce their monthly payments through consolidation or refinancing. For example let?s say you have a car payment that runs you around $350 dollars per month and you have a house payment that runs you $1000 per month. These two purchases together will drain $1350 per month from your account. If you speak to a bank or a credit union ask them if they have refinancing options available that will leave you with a lower monthly payment and a lower interest rate. This option should be used as a last resort as you are creating a loan to replace another loan in which you will most likely pay a lengthier term on.

Credit Counseling ?

Try speaking to a debt reduction service regarding your financial situation. It is important to make sure that the company you are speaking with is a credit counseling company in good standing with the Better Business Bureau and offers you free advice without pushing you into a debt repayment plan. The company you speak to should review with you all of your options before making the determination that there service is needed.

By looking into these options you may save yourself from declaring bankruptcy and harming your creditworthiness for up to ten years. Although bankruptcy is an option, it should be the last option as it does more damage than good in many cases.

Article written by Richard Munster