As the continuous economic struggles plague America, the financial strain on consumers has increased dramatically. When individual debts have mounted and creditor calls for late payments and defaults have increased, then the stress on borrowers can often be enormous. Certain actions can be taken to avoid a bankruptcy filing by assessing and changing one’s personal finance. Certain questions must be asked:

• Are the minimum payments due on credit cards each month the most the debtor can make?

• Are credit cards the only means to pay for household necessities due to the lack of money?

• Are cash advances being taken from one credit card only to pay off another?

• Are credit card balances more than the debtor’s liquid assets?

If the answer is “yes” to the above questions, an individual may be nearing severe financial problems. Many different events are likely attributable to bankruptcy filings including doctor bills arising from unplanned medical expenses, divorce, and job loss. The financial condition of each debtor must be considered and a plan of alternatives to avoid declaring for bankruptcy including a consolidation loan or tapping into a home equity line. In such situations, careful analysis must be given to the following:

1. An intricate review of the any new loan’s terms.
2. Ensuring the ability to make new payments even if unemployed or unable to work for a six-month period of time.
3. If a home equity line is used, then it should be only up to the amount needed to pay off other debts, particularly those with high interest rates.
4. Discontinuing the future use of any credit cards indefinitely until the financial difficulties are overcome.

Before any debtor files for bankruptcy, it is advisable to take 30 days and follow these three easy steps:

1. Detailed tracking of all expenses, including every expense at convenience stores, gas, tips, coffee, etc.
2. Develop and stick strictly to a household budget with the goal to maximize available cash.
3. Planing for major expenses including establishing quantifiable financial goals.

All effort should be made to pay all debts under the terms of the agreements in order to avoid additional finance charges and to build credit scores. In addition, the highest interest rate credit cards should be paid off first and then the lower interest rate cards. With sound financial discipline, debtors may be able to avoid bankruptcy and regain control of their lives.