Bankruptcy is something no one plans for.  No one thinks it’s a great idea.  Even though people do everything they can to avoid it, sometimes  good people have to resort to bankruptcy.

The fear, guilt and shame that come with bankruptcy are awful and if at all possible I recommend avoiding bankruptcy.  Sometimes it’s hard when you’re drowning in debt to think of ways out.  You’re emotional and your thoughts are consumed with getting out from under the weight that is holding you down.  Perhaps selling your car, taking an extra job (think pizza delivery), having a garage sale, and cutting extra spending each month will be enough to do the trick.  Most would agree that these sacrifices are better than the alternative.

 There are two main types of consumer bankruptcy:

• Chapter 13 which means the court approves a plan for you to repay your debts over time.
• Chapter 7  which means the court sells your assets in order to pay back as much as possible, with some exemptions that vary state to state, to allow you to keep some personal items and maybe some home equity.

Bankruptcy doesn’t eliminate:

• Child support
• Alimony
• Taxes
• Student loans

Where to go from here:
If you’re serious about getting out of your financial mess start with the basics.  Don’t look at your expenses and try to cut here and there.  Start with a clean slate.  The basics you need to survive, yes survive, are food, shelter, clothing, utilities, and transportation.  First make sure you have food on the table and utilities.  I’m talking rice and beans not take out pizza.  Then make sure your rent or mortgage payment is up to date.  You already have clothes so make due with those for now.  That takes care of your basic needs now on too everything else.

Sell eeevveeerryyyythhhiiinggg.  Sell your old books, your old CDs, old toys, tools, home decor, anything that you no longer need or that you can replace later once you have your finances in order, sell!  As Dave Ramsey says, “Sell so much the kids think they’re next.”  With the money you get pay a little to each creditor you owe to show them that you are trying.  It’s better to pay your rent/mortgage in full each month than to pay off your credit card.  You need a place to sleep.

There is life after bankruptcy so if you have to go through it you will survive but it’s best to avoid it if at all possible.

There are a lot of headlines making the news about the impact debt and bad credit is
having on families and society as a whole. Desperate people are doing desperate things
to get money they need to satisfy their own financial problems. People are developing
more mental health issues and stress-related medical conditions due to the constant
worry over financial stability. If you are one who also loses sleep at night due to your
big pile of bills, it is time to start reversing your bad money habits so you can live a
wealthier and healthier future.

Reality of Debt
If you have ever had a bill collector ringing your phone twenty times a day or live with
the fear of having your car repossessed because you can’t pay your bills, you likely
understand the constant strain individuals live with daily. This stress can make it difficult
for you to even get out of bed in the morning or even go to sleep at night. Not only does
bad money management keep you from getting financially ahead, it places a great toll
on your physical health.

Stress can do a number on your body. Not only do you develop the dark, foreboding
circles under your eyes and may find yourself sick more often, you also are likely to
become anxious, eat poorly, and stop practicing your healthy habits. Stress over your
finances often leads to depression, especially when the money troubles have become
so bad, you don’t know where to turn.

Adding insult to injury, your credit score suffers greatly every time you miss a bill
payment or default entirely. This leads to your having to spend more just to get the
basic services you need in life like car insurance and utilities. You credit score is a very
important factor in your overall financial health and if it remains compromised by your
poor financial management, your overall physical and mental health will begin to suffer
as greatly.

Adding Salt to the Wound
When you live stressed out about your money issues, you will look and feel much older
than you are and that stress will begin to take a toll on your body. Your propensity
for being sick more often or developing more serious medical conditions is a reality
you’ll have to face. Stress causes your body to use a lot of its resources very fast. It’s
an innate reaction that dates back from the days when people needed to fight or run
in order to survive. The problem comes when stress turns your body into offensive/
defensive mode so often that it ends up wasting all available resources until you get
completely exhausted. And that is when aging and diseases can hit you the worst.

Medical treatment will start to add more debt to your growing pile and eventually you
may find yourself totally out of control with nowhere to turn. Once you have begun this
vicious cycle of debt and stress, your credit score will also fail you and make it next to
impossible to get the financial help you need.

The only way to stop the madness is to stop doing what you are doing. If you find your
current actions are making things worse, it is time to change your habits. Stop impulsive
spending and start budgeting every penny that comes into your household. As soon as
you see the effect of improving your personal finance habits, it will be much easier for
you to keep a cool head even when new problems hit you.

Financial Freedom Starts Here
Once you commit to turning things around, you need to start tracking every cent you
spend on a daily basis for a period of 30 days or more. You will need to always carry a
small notebook and pen wherever you go and account for all spending including your
morning coffee and newspaper. You have to be consistent and dedicated with this
tracking if you want accurate, reliable information to help you learn better money habits.

Tracking your spending is often an enlightening process as many people have no
real idea of how much their miscellaneous spending adds up to at the end of a month
or even a year. Small items are often overlooked but can be a real turning point in
reconstructing your finances if you stop buying and start saving.

After the 30 days of consistent expense tracking is over, go back and add up all your
expenses in different categories like gasoline, entertainment, food, and clothing to find
out how much of your money you are putting out there. Try splitting things into smaller
categories to figure out how every type of purchase affects your bunged. When the
totals are done, think about how much different your life would be if you saved $225 a
month rather than spending it on fast food and stuff you don’t need to survive.

It can be difficult to change your habits so start small, changing one bad money habit at
a time. This will help you incorporate better habits into your financial life and allow you
to clear up your existing debts. You can worry less and enjoy a healthier life without the
stress and strain ruining your life, your looks, your health, and your overall well-being.

This is a guest post written by Eliza Collins, a professional writer specialized in the
personal finance space. Eliza’s experience includes working for financial institutions,
private debt relief companies as well as years of balancing the family budget. You can
read more of her articles at the debt settlement blog.