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With unemployment at an all time high, and many families struggling through financial difficulties, it’s easy to view bankruptcy as a way out.  But declaring bankruptcy may not only be damaging to your credit, it could also affect future purchases and opportunities.  If you are considering filing for bankruptcy, here are ten ways to avoid bankruptcy.

1.  If you have a lot of credit card debt and you’re having trouble keeping track of which one to pay next, try contacting your creditors and having all the due dates switched to the same date.  This can help prevent late fees which can add to your existing debt – making it difficult to get ahead financially.

2.  The next thing to do if you have high credit card debt is to talk to your creditors.  Creditors may seem like the enemy at a time when you’re debating bankruptcy, but the truth is they may be able to work with you if it means they won’t lose all the money they lent you.  Negotiate and see if lenders will lower your interest rate and work out a repayment plan.

3.  While this tip may already be too late, it’s important to call your lenders/creditors even before your first late payment.  If you find yourself making the minimum payments and getting behind, be sure to see if your creditors are willing to work with you to forgive a late payment without penalty or extend the deadline.

4.  One alternative to high interest credit card debt is to refinance your home and get cash out.  Because your mortgage is secured debt, it has a much lower interest rate than most credit cards.  By refinancing, you can use secured debt at a low interest rate to pay off high interest unsecured debt.

5.  The most important thing to maintaining a healthy financial life is to live within your means.  This means to spend less than you earn – which is understandably a very difficult lifestyle change.  However, if you want to get out of debt, the best thing is to begin sustainable spending habits immediately.

6.  Along the lines of Tip #5, stop buying unneeded stuff.  While this may only apply to a certain group of people, the truth is it’s hard to resist the spending urge once you’ve developed a habit.  Instead, the next time you go to spend that extra $50, think about how much value that object really adds to your everyday life, and if it’s not crucial – save the purchase for when you’re financially ahead.

7.  If you are not on the brink of declaring bankruptcy, one tip to keep your finances in check is to save a large emergency fund.  By large I mean 4-6 months of take home salary.  This way, if disaster strikes (i.e. you lose a job), your emergency fund should hold you over until you find a job.  And even if you don’t find a good enough job within 6 months – the savings will still help cushion the blow from the loss of income.

8.  Consider getting rid of extravagant purchases if it makes sense.  If you just bought a new car and you’re having trouble making payments, think about trading it in for a cheaper car.  While it’s never fun to get rid of nice things, it’s more important to focus on being debt free and getting necessities paid for, like your mortgage.  Granted selling your 1-year old flatscreen at a third of what you paid for is probably a bad idea, because you don’t get much money out of it, and you just lost something that’s already paid off – so be sure to think about which purchases are a money-hog.

9.  Stay up to date on your credit score.  Many people assume they can pay off their debt by refinancing, or by applying for more credit to hold them over.  However, if your credit score has dropped and you don’t know it – you may be in for a rude awakening when your application is denied.  So be sure to check your credit score with Quizzle throughout the year, and dispute any errors.

10. If you have trouble budgeting, try getting rid of all credit cards and going back to spending cash.  Allow yourself a certain amount of cash each week and only spend what’s in your wallet.  Sometimes the best way to stop spending is to simply only spend what you have on hand.

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