What's the best way to get out of debt without filling bankruptcy?

Question

I am working a second job and have cut back on my spending but it just seems like its not working.

Answer 1

Instead of Bankruptcy .... try Bank Robbery! Just a thought!

Answer 2

Honestly, I wish I had filed for bankruptcy back when I had a lower income - all my credit cards would have been gone, and I would have by now saved up for a down payment on a condo or a house. Two years would have also passed since the bankruptcy and I'd be able to buy some real estate. My dad did things that way, and things are working good for him. Don't discount bankruptcy until you've researched the option.

Realize that working more hours is your last resort. Seriously. I'll bet anything if you look over the past few years, your income kept getting bigger and bigger...and yet, this did not solve your financial problems. You have to cut your spending. A few folks suggested how to do it, so I won't repeat.

Myself, I set up online banking so that all my bills are paid on time, every month. I make sure to pay at least double the minimum on the credit card I'm trying to pay off. I can do the math ahead of time, and know how much I'll have left over some particular month. So I take out cash from the ATM once a month, and I don't touch any plastic, or talk to any bankers. Oh heck, I've shredded all my plastic minus the ATM card for the checking account. And that one doesn't stay in my wallet longer than one day a month.

It's not easy downsizing. Trust me, I make a lot of money, but it's all gone before I see it. When I got my first apartment a year ago, I had to go dumpster diving to get some furniture. For a long, long time I'd spend all my spending money by the end of the first week, and by the end of third week there was no more food in the fridge. But I sucked it up. I figured out how to live on that puny amount of cash every month, I'm doing it, and I will be doing it for some time to come.

There are lots of different ways to deal with this. What's important is that you keep at it until you succeed.

Answer 3

I've certainly been there but, here are several things I did to help myself out of this bind.

1. Cut up any credit cards (if you still have them).

2. Obtain a credit report, you can get one free from the fed government on-line: http://www.ftc.gov/bcp/conline/pubs/credit/repair.shtm

3. Once you have printed out your credit report, call the creditors or write to them and offer a monthly payment plan. Most people will be amiable to working with you.

4. I read on another post that someone suggested taking a roommate, this is a good idea. If it can't work for you, consider moving to a place you can better afford.

5. If have a car payment, trade for a lessor car without one.

6. Are you eating out at restaurants often? Renting movies? Are your hobbies costing too much? You can rent DVDs at the Library for free. These are all sacrifices and, yes, they aren't fun but, they'll work and if you look at it as a temporary situation, it will be tolerable.

Answer 4

Pick on debt to pay off first - usually the one with the highest interest and make the biggest payment you can each month until it's gone, then go to the next one and do the same unti all your debt has been eliminated. If you just pay each creditor the minimum each month - you will NEVER be out of debt. If you have 10 creditors and you choose to follow the formula above, call the other nine and let them know that you are trying to get out of debt... they will frequently lower your interest rate or payments because their number one goal is to get paid. You may have to close those cards or loans to get the better rate, but your creditors do not want you to defaut or declare bankruptcy!! GOOD LUCK!!

Answer 5

You have to live within a budget/means to get and stay out of debt. Cut up ALL credit cards and only pay with cash to stay within your budget.

Write down every CENT, every cent, for the next week, then month, to see places you might not realize your are spending money, like Starbucks coffee when you can bring it from home. Don't go out to dinner or lunch. Carry a sack lunch with beverage to work. Cut out the movies, the movie rentals, not necessities of entertainment; but once a month treat yourself to something less expensive but fun.

There is usually a credit counseling program through United Way that will help you to get out of debt. You have to make sure it is a non-profit program! They can take to creditors and get many of the interest rates lowered, consolidate debts wisely, etc.

Even with a second job, it is hard to catch up. Start doing things like only buying necessities, not luxuries, and then on sale and use coupons. Wear the same clothes, shoes, etc., this season. You won't die from not having the "latest" in fashion, whether you are male or female. If you have more than basic cable, drop it and see how much you save. Turn up the a/c or down the heat by two or three degrees and save money. If you are not in a room, turn off the light. Do you start to see a pattern?

Writing things down, living a life at home to read or watch TV, using coupons, going to sales (groceries included), every little bit helps.

Answer 6

Learn how money works. It depends on how much debt you have, how much you're paying every month, and how much you're earning after-tax. Do some odd jobs like mowing the lawn or raking leaves for neighbors.

You need to cut back on unnecessary things. Anything that is not food, shelter, clothing, or transportation is unnecessary. Don't buy new clothes or brand name clothes. Don't go to restaurants - make food at home and take it to work. Stop spending money on stuff like starbucks coffee and movie tickets, and that 1000 channel cable TV.

You have to be willing to stick it out for a few years and discipline yourself on spending. Make sure you're paying your credit card bills and stuff on time, and more than minimum.

Here's the way it works. Find out the credit card with the highest APR, and pay the most amount of money on it every month - and don't miss any payments. And pay the minimum on the rest of the credit cards. When the credit card with the highest APR is paid off, use that money to pay off the card with the next highest APR, and repeat until all cards/ debt is paid off.

And go to the local library and read books on how to get out of debt. The best book I've read is: Rich Dad's Guide to Becoming Rich Without Cutting Up Your Credit Cards. Check it out.

Answer 7

The system is designed so that you fail. I was in a similar situation and this is what I did (and now I have loads of money and work whenever I like to). First, you need to get to an economy that has a stronger currency than the US dollar, or, a place where your cost of living is very low (the third world) and so you can save tons. You also need to get away from the tax system, which you can do when you go international. Two years of this and your debt will be gone. And you will have fun too!

Answer 8

If you have a lot of credit cards and debt, honestly it will be a very long time before you can get out if your income doesn't keep rising quickly. People talk about paying off high-interest credit cards first, then take that money that would have gone toward that card and put it toward another card or debt.....but come on - that is OK for someone with a cash flow to support it, but if you're buried from the start, paying off one card only frees up money to buy food or gas.

I've been in a very bad debt situation, and I filed bankruptcy. It wasn't bad. After 7 years it dropped off my report. So what that I had to use high-interest cards in the first few years? I kept the balances low or paid off and helped build my credit up at the same time. If I didn't file, I'd still be swamped in debt today, and I think I'm close to living paycheck-to-paycheck as it is. Bankruptcy helped me, but it may not be best for everyone. Look at all options - including bankruptcy.

My best advice to get out of debt is not to pay off bills or decrease/manage spending, but to increase income. Easily said, but how do you do it? There are lots of places to find info on starting an internet business for next to nothing. Try eBay. Try AdWords or AdSense. Use what you know to create a unique product and sell it. Do research and you'll find plenty of free info that will get you on track.

Answer 9

I agree with those who suggest paying off smallest debts first. Reasons being are that once that first one is knocked off, you get a sense of satisfaction and accomplishment quicker, and with that newfound confidence you can take that payment and "snowball" that into the remaining smallest debt. If you attempt paying off higher-balance debts, it'd take you a longer time and you are more likely to get frustrated in the process. Yes, it will take a long time regardless and you'll need to sacrifice, but bankruptcy should be a VERY VERY last-resort option; in fact, it shouldn't even be an option because anyone with any income can get out of debt. It's a proven fact - it just may take certain people longer than others, but you can get it done.

Answer 10

If you are young, I'd file bankruptsy and get out of all that debt. However if you don't want to go that route pay off the lowest bills first (or the highest) which ever you choose, and pay more than the set monthly amount maybe 10-20 dollars more. I'm about to get everything paid off, but I'm paying my highest bill (which is 1200.00) and my lowest which is 500.00 then the only thing I will have to pay off is my new car payment, which I'm able to pay that off in less than a year. (because of the down payment I put on the vehicle)

Answer 11

My wife and I are buried due to an incorrect withdrawal from out checking account. We are disputing it, but it has devistated us.

I thank God that it has happend though because it was a final straw to get us to reprioritize things.

Tim A.'s suggestion is great! (Tim, have you been reading Dave Ramsay's books?) A friend recommended reading "The Total Money Makeover" by Dave Ramsay. It is solid, sensible logic that really works. There is no magical debt escape hatch, but it helps to have someone give you some simple next steps to make quick progress. We have found our idea of cutting back and eliminating excess was not really what we needed to do for now.

Best wishes. It is a rough place to be, but make a committment now or things will get unbelivably worse than you would dream. Sometimes things do go so far that you need professional and/or legal assistance.